Facebook Inc. is already trading like a public company asinsiders and wealthy investors use private marketplaces to buy andsell stock in the social-networking company ahead of its initialoffering.

The shareholder base has grown to more than 1,000, compared withthe 50 to 100 investors most companies have when they go public,according to an estimate by Sam Hamadeh, head of research firmPrivCo. Private purchases pushed Facebook's valuation past $100billion this month, possibly limiting immediate gains for IPOinvestors, given that Facebook may seek a $75 billion to $100billion value.

“Facebook is a blue-chip stock and it's not even public yet,”said Kevin Landis, portfolio manager for the Firsthand TechnologyValue Fund in San Jose, California. Facebook jumped as high as $44this month in private trading, valuing the company at $103 billionand leaving it higher than when Landis bought stock at about $30 to$31 in October. He said he aims to add to his holdings.

While demand for the biggest Internet IPO on record may push thestock even higher when Facebook goes public, private trades throughchannels such as SecondMarket Inc. and SharesPost Inc. are alreadymaking it possible for employees and venture capitalists to cashout. That may have lessened pressure on Chief Executive OfficerMark Zuckerberg to hold an IPO before this year.

Facebook, which filed for an initial share sale this month, hasyet to set its price range for the IPO. People with knowledge ofthe matter said earlier this year that Zuckerberg was weighing avaluation of as much as $100 billion.

Larry Yu, a spokesman for Menlo Park, California-based Facebook,declined to comment.

The private trading may make Facebook's debut more like asecondary offering, where holders sell stock in an already publiccompany, said Barry Ritholtz, CEO of FusionIQ, an equities researchfirm.

“The people buying now at the IPO price are presuming there'slots of upside — I'm skeptical,” said Ritholtz, whose firm is basedin New York. “There's a lot of smart money agitating for thehighest possible valuation, and they don't necessarily have theinvesting public's best interest at heart.”

Insiders and investors with $1 million of net worth and a salaryof more than $200,000 can qualify to buy stock on privatemarketplaces, according to U.S. Securities and Exchange Commissionrules. In an auction this week on SharesPost, Facebook stock had aclearing price of $42, valuing the company at $98 billion.

Higher Value?

Widely traded private companies that held IPOs in 2011 traded atabout 25 percent to 30 percent less than their eventual IPO pricein the two months prior to going public, according to Ori Bash, avice president at Pluris Valuation Advisors. Facebook may see asmaller gain because it has been traded more, owned by largerinvestors and researched more thoroughly than other privatecompanies, Bash said. It's also possible the shares will continueto surge, he said.

“If these private-market trades are truly reflective ofFacebook's valuation, there's a possibility that demand for the IPOshares could drive it even higher than its anticipated $100 billionvaluation,” Bash said.

LinkedIn Corp., which had 560 shareholders of record as of April15, 2011, was valued at $35 a share in private trading in March ofthat year, two months before the IPO. The company's initial publicoffering priced 29 percent higher in May at $45, giving it avaluation of $4.25 billion. Shares more than doubled to close at$94.25 on the first day of trading.

The shareholders who got into Facebook earliest –including thehundreds of employees who received restricted stock units as partof their compensation packages — will see the most gains, saidLarry Albukerk, a broker of private securities.

Based on private-market trading, Facebook is “realizing fullvalue at the IPO, which is the goal of all companies,” he said.“They don't want to leave money on the table. Do the RSU holdersand current shareholders benefit? Absolutely.”

Private markets have emerged since the tech boom of the late1990s and Google Inc.'s IPO in 2004. SharesPost, based in SanBruno, California, began in 2009, and SecondMarket predatesSharesPost, offering private share transactions since 2008. Sincethe start of the service, New York-based SecondMarket'sprivate-market stock trades have topped $1 billion. Facebook isplanning to raise $5 billion with its IPO.

While the private markets are giving investors a better idea ofwhere the public market prices shares, they don't completelyreplicate the Nasdaq Stock Market or New York Stock Exchange, saidLandis, the portfolio manager.

“The idea that it should give you the perfect indication onprice — i.e. there would be zero bounce because it's perfectlypriced in — I'm not sure I'd buy that,” he said.

Facebook's sales surged 88 percent to $3.71 billion in 2011,according to the IPO filing, and may climb to $6.1 billion thisyear, EMarketer Inc. estimates show.

At $100 billion, the company would be valued at about 27 timeslast year's sales, almost double the 14.5 times trailing 12-monthsales at which professional-networking service LinkedIn Corp. wentpublic in May. It's almost triple the multiple of 9.8 times impliedby online coupon-company Groupon Inc.'s IPO price in November, andfour times social-gaming provider Zynga Inc.'s multiple of 6.8times at its December IPO, Bloomberg data show.

Facebook has 1,070 Class B shareholders based on its latestfiling, almost double the tally for LinkedIn ahead of its IPO,according to regulatory filings.

“Arguably, given the number of investors that are already inFacebook, that IPO has already occurred,” Mark Mahaney, an analystat Citigroup Inc., said in an interview on Bloomberg Radio thismonth.

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