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Can someone explain how this isn't insider trading? Day before deal: - Instagram closed a $50 million Series B round from Sequoia, Josh Kushner’s Thrive Capita

by joeblau 15y ago

Can someone explain how this isn't insider trading? Day before deal: - Instagram closed a $50 million Series B round from Sequoia, Josh Kushner’s Thrive Capital, Greylock and Benchmark at a $500 million valuation. Day of deal: - Company gets purchased for 1 billion. - All investors instantly double investment.

ochiba 15y ago
Christine Herron's comment on this post seems to explain: http://techcrunch.com/2012/04/09/right-before-acquisition-instagram-closed-50m-at-a-500m-valuation-from-sequoia-thrive-greylock-and-benchmark/ http://techcrunch.com/2012/04/09/right-before-acquisition-in... "It's common to use an impending investment valuation to drive a higher acquisition valuation. Strategic/acquisition values are typically much higher than investment values. eg, as of today, Instagram is worth more to Facebook than it is to Sequoia, because Facebook gets strategic value in addition to market value. Also note that an investor with a signed term sheet would be fully aware that acquisition discussions were taking place, as well as what valuation range they were in. I would be surprised if Sequoia did not go into this with eyes wide open. They win either way - an instant 2X multiple on investment (and a crazy high IRR), or a highly desirable company that they believe has growth potential. Call me jealous."
damoncali 15y ago
Instagram is not public.
mdda 15y ago
It's not insider trading, since the stock is not traded on a public market : There's no presumption that all the facts are out in the open. As long as there's no misrepresentation, it's all 'just business'. How about : "Let me invest right now, so that I won't vote against the FB offer you've got on the table". Or "If you let me invest now, I can make a recommendation to the FB board that they acquire you".
- joeblau 15y ago
  Thank you :)
rokhayakebe 15y ago
I am willing to bet the $50M raised is all the cash the founders pocketed, FB gave stocks to investors and the team.

by joeblau 15y ago

ochiba 15y ago

Christine Herron's comment on this post seems to explain: http://techcrunch.com/2012/04/09/right-before-acquisition-instagram-closed-50m-at-a-500m-valuation-from-sequoia-thrive-greylock-and-benchmark/ http://techcrunch.com/2012/04/09/right-before-acquisition-in... "It's common to use an impending investment valuation to drive a higher acquisition valuation. Strategic/acquisition values are typically much higher than investment values. eg, as of today, Instagram is worth more to Facebook than it is to Sequoia, because Facebook gets strategic value in addition to market value. Also note that an investor with a signed term sheet would be fully aware that acquisition discussions were taking place, as well as what valuation range they were in. I would be surprised if Sequoia did not go into this with eyes wide open. They win either way - an instant 2X multiple on investment (and a crazy high IRR), or a highly desirable company that they believe has growth potential. Call me jealous."

damoncali 15y ago

Instagram is not public.

mdda 15y ago

It's not insider trading, since the stock is not traded on a public market : There's no presumption that all the facts are out in the open. As long as there's no misrepresentation, it's all 'just business'. How about : "Let me invest right now, so that I won't vote against the FB offer you've got on the table". Or "If you let me invest now, I can make a recommendation to the FB board that they acquire you".

joeblau 15y ago
Thank you :)

rokhayakebe 15y ago

I am willing to bet the $50M raised is all the cash the founders pocketed, FB gave stocks to investors and the team.