PhillyDeals: Facebook's early shares an IPO unknown

Facebook

isn't a public company, but that hasn't stopped employees, ex-employees, and vendors from trying to cash in on private stocks the company gave away in its cash-starved early days.

Those early shares of the time-sucking online image-and-message network could yield fat - even Google-size - profit, if Facebook converts them into public shares as part of a well-hyped public-stock offering.

Can outside investors get in early and grab a piece?

Felix Investments L.L.C., a New York firm founded in September, has been offering "qualified investors" (rich people and institutions with professional advisers) a chance to buy into a company called Facie Libre Associates I L.L.C. (Latin for Face Book).

Facie Libre says, in a confidential letter sent to prospective investors, that it has signed nonbinding letters of intent to buy up to $40 million worth of Facebook shares from current or former insiders.

The letter doesn't explain how the group is valuing the shares, except to note that its managers believe the prices are "favorable" to Facie Libre.

Which makes it tough to figure out what it would take to make this a profitable deal.

The question for potential investors isn't just: What is this company really worth? But it's also: How big a cut do the middlemen and the original share owners get, before Facie Libre's investors get a piece?

Felix is managed by Frank G. Mazzola and William L. Barkow, former brokers at Oppenheimer & Co. Inc., among other firms. Their attorney, Mitchell Littman, of Littman Krooks L.L.P. in New York, declined to comment.

Facebook is aware there is a pre-IPO market in its private shares.

"We've said we see ourselves becoming a public company along our journey," Facebook spokesman Larry Yu told me, "but not imminently."

The company said in the fall that it had become "cash-flow positive," which ought to be a prerequisite for going public. But it still doesn't release audited earnings statements or other basic information that shows how it is getting paid and what it is spending.

Yu declined comment on the Facie Libre offering.

Two-thirds of investment bankers expect there to be more initial public stock offerings this year, after the market deflated to nearly nothing over the last two years, according to a survey by

BDO

(formerly

BDO Seidman L.P

.), the fifth-largest U.S. accounting firm.

Private-equity investors are pushing for deals because they need to get back the money they pumped into companies they bought in the early- and mid-2000s, W. Scott Balestrier, tax partner at BDO's Philadelphia office, told me.

He cited recent examples:

Graham Packaging Co. Inc., of York, Pa., filed for a $350 million share sale in December, 12 years after leveraged-buyout giant Blackstone Group L.P. first invested. "It was time to get their cash back," Balestrier said.

Select Medical Holdings Corp., of Mechanicsburg, Pa., sold shares last year, five years after a group led by investor Welsh, Carson, Anderson & Stowe took the rehab-hospital chain private.

There are still lots of obstacles to going public, besides the uncertain stock markets, warned BDO auditing partner Jack Giegerich.

Smaller companies that have sold shares complain of being "choked" by federal antifraud and governance-compliance rules. "I'm still hearing from small public companies looking to go private," he said.

Retrievex

, the Conshohocken record-management service headed by

Peter Pierce

, former owner of

Pierce Leahy Archives

, says it has purchased

Save-A-File Systems L.L.C.

, of Manassas Park, Va., to expand into the metro Washington market.

Pierce won't say how much he and his partner, Welsh, Carson, Anderson & Stowe, paid for Save-A-File.

Retrievex's yearly sales total about $25 million, executive vice president Joseph A. Nezi told me. Retrievex employs about 185 at its Ashton Road plant in Philadelphia and at sites in the Boston, Hartford, and New York areas. Save-A-File employs 15. "At this time," Nezi told me, "we plan on retaining all employees."