The secret’s out. Two Greenwich-based founders of a little social networking company are about $65 million -- or $31 million - richer after suing Facebook, depending on whose financial information is right. Now they are suing again, claiming they were mislead about the value of Facebook’s internal stock.
The suit is also creating quite a buzz in the financial world because the sealed court contained information kept more secret that the Colonel’s secret recipe – what Facebook is really worth – until the AP got its hands on the document.
So, here’s what happened.
They sued him, claiming he stole their intellectual property when he worked as a programmer for ConnectU, CNET News reports.
In June, Facebook agreed to pay ConnectU $20 million in cash and 1,253,326 shares of common stock, the Daily Mail reports.
That information was recently released in The Recorder, a legal newspaper in San Francisco. The paper reported that ConnectU lawyers, Quinn Emanuel Urquhart Oliver & Hedges had published the amount -– $65 million -– in some of the firm’s own promotional literature, the New York Times reports.
Then there are the court documents.
Earlier this week, the AP got its hands on court documents dating back to June, when ConnectU vs. Facebook was settled. They had been kept sealed because of information pertaining to the privately owned Facebook's valuation, CNET News reports.
Several media outlets lobbied to have the redacted documents made public. The AP did the job by using a copy-paste function in an electronic version in order to expose the censored content, CNET News reports.
ConnectU has contested the settlement, CNET reports. It founders claim that the value of Facebook’s internal stock was misrepresented, theNew York Times reports.
How much Facebook is worth has been as secret as the Colonel’s secret recipe. It has been a source of scrutiny ever since Microsoft invested $240 million in the social network at a $15 billion valuation, CNET reports.
That investment was one of preferred stock. Soon became clear that Facebook's paper valuation was significantly lower, CNET reports.
The AP story said Facebook was appraised at $8.88 per potential share as part of the $3.7 billion valuation.
So, ConnectU received anywhere from $31 million and $65 million for settling the suit, depending on which stock valuation is used, CNET reports.
Facebook started in 2004, a few months before ConnectU went online. It has 31 million users, compared with about 70,000 users for ConnectU, based in Greenwich.