SEC takes action against privately held company under Rule 10b-5

Very interesting, thanks for sharing.

Wow.

This is a tough one.  Many investors will purchase stock from a company at a premium to the valued price, just to get a chance at later success.

Take a look at this 2007 article discussing the Microsoft investment of $240MM for 1.6% of the Facebook.  At the time Facebook's avlue was estimated to be between $100 an $150MM.  That's right, Microsoft purchased 1.6% of a $150MM company for $240MM!!  Quite a premium.

The difference in the Steifel story is that the company actively worked to deceive it's employees and investors, while buying back their shares.

What if Facebook had established a buy-back program in 2007 at the same time as the MSFT investment?  Could they have legally bought back shares using the $150MM value, or would they have to use a $15B value, as viewed from the MSFT investment?

Just goes to show that values are liquid.  409A may have more impact than we realize. And, deceiving your employees and investors is probably not a god thing to do.

All good observations, Dan.  It makes me think that an active secondary market may prove to be just as useful in providing value transparency to private company shareholders as providing early liquidity opportunities. I also wonder if a secondary market may prove to be of good use in providing more realistic peer transactions for use in option pricing model factors.