Skip to main content

SEC investigating sales of Twitter, Facebook stock for conflicts of interest

secondmarket logoAccording to the Wall Street Journal, the Securities and Exchange Commission is investigating the shares market of private companies, including Facebook and Twitter. The SEC is probing “potential conflicts of interest” since these companies are selling shares in secondary marketplaces.

Clients like SecondMarket and SharesPost are largely responsible for holding and selling these types of shares for prices that have little to stand on other than ballpark valuations.The conflict: The higher brokers at one of these organizations sells the private company stock for, the larger cut they get. In short, it’s advantageous to spin Twitter or Facebook’s valuations as larger than they may actually be. However, a spokesperson for SecondMarket told WSJ that all valuations are based on external sources and that share prices are only set after negotiations, and that this in turn creates “an objective marketplace.” But it all gets very murky when dealing with private companies and their extremely private financial information, and this is why the SEC is stepping in. The WSJ references that the commission is also looking into other private sector share vendors, but did not list any other specifically.

Recommended Videos

The commission already regulates SecondMarket, including its individual brokers and investors as well as specific sales. However, SharesPost doesn’t fall under the SEC’s scrutiny – yet. If unstoppable forces like Facebook and Twitter want to continue to build their stock market portfolio and operate as private companies, they will likely have to put up with oversight from the commission into all of the trading platforms they use. Private stock exchange is a gray area that the SEC can’t quite control, but when private companies are making millions of dollars in fundraising rounds, it draws some attention. Facebook recently had to limit its share sales to consumers outside the US only when its deal with Goldman Sachs drew unforeseen interest from the SEC.

Facebook and Goldman Sachs may have escaped a full-fledged investigation in that particular deal, but the SEC isn’t backing down, and the matter may have been the trigger toward establishing a much more transparent private market. Hey, if nothing else, maybe this will inspire more of those IPO filings to start pouring in.

Molly McHugh
Former Social Media/Web Editor
Before coming to Digital Trends, Molly worked as a freelance writer, occasional photographer, and general technical lackey…
Bluesky finally adds a feature many had been waiting for
A blue sky with clouds.

Bluesky has been making a lot of progress in recent months by simplifying the process to sign up while at the same time rolling out a steady stream of new features.

As part of those continuing efforts, the social media app has just announced that users can now send direct messages (DMs).

Read more
Reddit just achieved something for the first time in its 20-year history
The Reddit logo.

Reddit’s on a roll. The social media platform has just turned a profit for the first time in its 20-year history, and now boasts a record 97.2 million daily active users, marking a year-over-year increase of 47%. A few times during the quarter, the figure topped 100 million, which Reddit CEO and co-founder Steve Huffman said in a letter to shareholders had been a “long-standing milestone” for the site.

The company, which went public in March, announced the news in its third-quarter earnings results on Tuesday.

Read more
Worried about the TikTok ban? This is how it might look on your phone
TikTok splash screen on an Android phone.

The US Supreme Court has decided to uphold a law that would see TikTok banned in the country on January 19. Now, the platform has issued an official statement, confirming that it will indeed shut down unless it gets some emergency relief from the outgoing president.

“Unless the Biden Administration immediately provides a definitive statement to satisfy the most critical service providers assuring non-enforcement, unfortunately TikTok will be forced to go dark on January 19,” said the company soon after the court’s verdict.
So, what does going dark mean?
So, far, there is no official statement on what exactly TikTok means by “going dark.” There is a lot of speculation out there on how exactly the app or website will look once TikTok shutters in the US.

Read more