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April 2, 2011 12:28 am
A Facebook employee was replaced after he bought shares in the company in the private secondary stock market in contravention of the company’s own internal rules.
The misstep is a black eye for the social networking company, which has increasingly come to rely on the fast-growing private market in its shares as it has held back from a full public listing.
The emergence of a liquid private market for its shares has made it possible for employees to cash in some of their holdings before an initial public offering and let outsiders build big stakes in the company, which is now valued by private share sales at more than $70bn.
However, the lower level of transparency around private transactions has at times created headaches for Facebook, given the regulations designed to protect investors in these markets, and the company has been criticised for holding back from a full initial public offering. Michael Brown, an employee in Facebook’s corporate development department, was replaced after buying shares in the company that contravened rules it had set to limit the timing of such purchases.
In a statement issued through his lawyer, Mr Brown said: “I did buy Facebook stock on the secondary market in early September 2010, and I did so with the absolute best of intentions and only because I believe in Facebook.”
However, he denied a report that his purchases were related in any way to the $1.5bn investment in Facebook that Goldman Sachs tried to arrange at the start of this year.
The Goldman-led investment was later revamped and an offering to US investments scrapped after news of the planned private share sale leaked out, potentially putting the sale in contravention of US securities laws.
“I am saddened by the course of events that led to my departure and the incorrect reporting of it,” Mr Brown said. “I am now focused on moving on past this unfortunate series of events.”
Facebook declined to comment.
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