SecondMarket Facebook Auction #43 Fails To Clear Any Shares
All this year TechCrunch and others were covering the weekly SecondMarket auctions for Facebook stock. 2.7 million shares, for example, cleared in aggregate the first five auction at prices ranging from $21.01 to $28.26 per share.
Context & Ripple Effects
The weekly Facebook auctions were SecondMarket's marquee franchise: a December 2010 clearing at a $56 billion valuation in a 'significantly oversubscribed' auction, followed by a January Q4 report showing demand for private shares doubling. By May 2011 the auctions were no longer 'significantly oversubscribed', and auction #43 is the first reported failure to clear any shares at all — the demand curve has now gone flat.
That trajectory matters because these auctions were the de facto price discovery mechanism for Facebook stock and the liquidity promise underpinning employee and early-investor holdings. A failed print removes the reference price entirely rather than marking it down.
First-order effects
- Holders who consigned shares to auction #43 get no liquidity this week and must either re-list at lower reserve prices or wait, with the last cleared prints ($21.01–$28.26 across the first five auctions of the year) now a stale benchmark.
- SecondMarket's flagship weekly franchise loses its headline proof point — the failed clearing hands skeptics of private-share valuations their first clean data point.
Second-order effects
- Other companies whose stock trades on SecondMarket — Zynga notably blocked the platform from selling its shares back in December 2010 — face the same repricing logic, since a stalled Facebook print drags on the whole late-stage private market.
- A frozen secondary market increases pressure on Facebook itself to deliver liquidity through an IPO rather than leave employees dependent on thin weekly auctions.
Third-order effects
- If the pattern holds, secondary platforms like SecondMarket are revealed to be cyclical businesses keyed to a handful of hot issuers rather than durable exchanges — a structural fragility regulators were already probing when SecondMarket said in December 2010 that the SEC 'has not asked us for anything.'
- The episode strengthens the case that private valuations set by thin, intermittent auctions are not prices in any deep-market sense, pushing the industry toward disclosure-heavy structures or earlier public listings.
The trend: Secondary-market demand for pre-IPO social media stock is decelerating through 2011 — from oversubscribed to merely clearing to failing — shifting the liquidity burden from private auctions toward IPOs.