SEC probes trading in privately-held Internet firms

CALIFORNIA, USA: The U.S. securities regulator is looking into share trading in privately-held Internet companies including Facebook and Twitter, media reports said, citing people familiar with the inquiry.

The Securities and Exchange Commission has sent letters to several people trading in the stock of these companies, seeking information about topics that include how such funds are valuing shares of those firms, the Wall Street Journal reported.

An SEC spokesman declined comment to the WSJ.

An emerging crop of online trading platforms like SharesPost and SecondMarket facilitate share trading of leading unlisted Internet firms.

The probe is in a preliminary stage and appears to be partly focusing on funds that have been set up to allow investors to trade in private companies, the WSJ reported.

The regulator may also probe how the existence of funds affects an SEC rule that states that private companies must have fewer than 500 shareholders, or else publicly disclose significant financial information. This was part of the reason Google Inc went public in 2003, the Financial Times said.

In recent months the implied value of Facebook has risen more than 50 per cent, while the value of Twitter has more than doubled, the FT reported.

Early employees and investors in private companies have recently been selling their stock to buyers who want exposure to these fast-growing enterprises, the FT said.

The SEC could not be immediately reached for comment by Reuters outside regular U.S. business hours.