Congress Queries Facebook on Privacy Again, Investors Unfazed

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A whiff of controversy or trouble ahead can send investors running for the hills. But in Facebook's case, investors interested in shares of the privately held company apparently don't mind that two high-ranking House members are demanding information about how third-party applications on the popular social networking site were able to harvest user IDs and share them with advertising networks.

Reps. Edward Markey (D-Mass.) and Joe Barton (R-Texas), co-chairs of the House Bipartisan Privacy Caucus, sent a letter to Facebook CEO Mark Zuckerberg Monday, seeking details about the number of Facebook users affected by the privacy breach. They also want to know when the company discovered the problem and what steps it took to resolve the issue, according to a report in the Wall Street Journal, which initially uncovered the privacy debacle.

Facebook, according to the letter, is required to respond by Oct. 27. The Wall Street Journal report delved into a potential gap in the social networking giant's privacy policy, which the publication found allowed third-party apps developers to share user IDs and those of their friends with "dozens of advertising and Internet-tracking companies."

A Facebook executive over the weekend tried to head off the controversy at the pass, stating in a blog:
Recently, it has come to our attention that several applications built on Facebook Platform were passing the User ID (UID), an identifier that we use within our APIs, in a manner that violated this policy. In most cases, developers did not intend to pass this information, but did so because of the technical details of how browsers work.

Press reports have exaggerated the implications of sharing a UID. Knowledge of a UID does not enable anyone to access private user information without explicit user consent. Nevertheless, we are committed to ensuring that even the inadvertent passing of UIDs is prevented and all applications are in compliance with our policy.
As Reps. Markey and Barton await answers to their letter and the Facebook privacy saga kicks up again, investors are apparently unconcerned that the new inquiry will hurt the company's prospects for riches or a future IPO.

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Two large buy orders came into SharesPost Tuesday, seeking to snap up shares in the privately held Facebook. One order sought to acquire 2,000 to 3,000 shares at $29 a pop, with the investor willing to shell out upwards of $87,000, and the other order wanted 1,750 to 2,000 shares at $16 a share, or as much as $32,000. SharesPost matches buyers and sellers of stock in privately held companies via private sales.

Facebook employees, for example, may be sitting on some company shares, but until the social networking giant goes public their ability to monetize their stock is limited.

And for those who turn to private sales, the cost of unloading stock has gone up. Facebook is now charging sellers a $2,500 transaction fee, according to a Bloomberg report. The fees can act as a potential deterrent against widespread distribution of the shares, which privately held companies would likely appreciate. If a company has more than 500 shareholders, the Securities and Exchange Commission takes the view that financial information needs to be disclosed, the Bloomberg report notes. And that financial information is apt to include figures a company wants to keep under wraps until it files to go public.

For Facebook, concerns about staying under the radar for financial disclosures may be the least of its problems as its faces the Oct. 27 deadline to respond to the House members' letter.
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