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박재훈투영인 프로필 사진박재훈투영인
Private Company Stock Trading Frenzy: Here's Who's Trading What(Jan 22, 2011)
created At: 2/12/2025
Sell
Sell
This analysis includes a sell recommendation. Please carefully review all mentioned risk before proceeding.
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Fact
Facebook was the most traded company on SecondMarket in 2010, accounting for 39% of all pre-IPO transactions. SecondMarket allows accredited investors (earning $200,000+ annually or holding $1M+ in assets) to buy private company stock. The average transaction size is $2 million, with most trades made by hedge funds and VC firms, not individuals. Facebook stock trading follows an auction model, where: SecondMarket gauges buyer and seller interest before starting. Auctions run for nine days, with the highest bidders winning shares. SecondMarket charges a 3-5% commission, split between buyers and sellers. Facebook auctions occur regularly, providing frequent investment opportunities.
Opinion
While private stock markets like SecondMarket offer exclusive access to highly sought-after pre-IPO companies, the system favors institutional investors and high-net-worth individuals, shutting out the average retail investor. Facebook’s dominance on SecondMarket (39-45% of trades) raises concerns about market concentration and speculative frenzy, as demand skyrockets despite limited supply. The high auction-driven pricing mechanism can easily lead to overvaluation, leaving late entrants exposed to potential losses if the stock corrects post-IPO. Furthermore, liquidity is a major risk—unlike public stocks, private shares cannot be easily resold, meaning investors may be stuck with overpriced assets until an exit event, like an IPO or acquisition, occurs. While the hype around Facebook was justified in hindsight, history warns that private stock markets often create bubbles, with early buyers profiting while later entrants get burned.
Core Sell Point
Private stock hype creates artificial scarcity—latecomers risk overpaying for illiquid shares.

SecondMarket, the online marketplace for buying private company stock, just released their 2010 data.

Naturally, Facebook ranks number 1, making up 39% of all pre-IPO completed transactions.

SecondMarket also revealed who's making all the trades, which industries are the most popular to trade, and which private companies are traded most.

Want to get buy a piece of Facebook?

SecondMarket, the service that lets you buy private company stock, is your way in.

But first you must qualify as an "accredited investor."

By SEC definition, an accredited investor earns more than $200,000 per year or holds at least $1 million in assets.

If you meet those qualifications and you pass SecondMarket's criminal background check, the chances of you getting a chunk of Facebook are still slim.

Second Market rep Mark Murphy tells us the average transaction on the service is a whopping $2 million.

In addition, most investors are not individuals. They're institutions like hedge funds and VC firms that the private companies choose to let invest in them.

If you meet all the requirements to begin trading, the process is relatively simple. You can either purchase stock on SecondMarket's website or through one of their market specialists. 

Since Facebook makes up 45% of SecondMarket's business, there's a special process for trading its stock.

Here's how it works:

  • SecondMarket evaluates seller interest before starting an auction.

  • Next, SecondMarket checks potential buyer interest.

  • Once both parties are set and a share price has been established, the bidding begins. The auction remains open for nine days.

  • At the end of the auction, the highest bidders take the available shares.

  • SecondMarket takes a cut between three and five percent of each transaction. The cost is split evenly between the buyer and seller.

  • The stock is yours. These Facebook auctions take place somewhat regularly, so there's plenty of opportunity.

And that's it. If you can afford it, you can own stock in the hottest company everyone wants a piece of.



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