Sales offers to pre-IPO shares of well-known social media companies, including Facebook, are scams that bilk the public by peddling non-existent securities of these companies, the Financial Industry Regulatory Authority (FINRA) said in a warning this month.
The scams seize upon investor demand for shares of the private stock of high-profile companies, FINRA said in an investor alert, “Pre-IPO Offerings — These Scammers Are Not Your Friends.”
FINRA noted that pre-IPO speculation involves buying unregistered shares in a private company before the initial public offering (IPO) of securities. While a company can indeed sell its unregistered shares in private placements, FINRA said, these investments can be fraught with risk and are typically open to a select group of investors who meet certain income or asset thresholds.
“While most pre-IPO offerings are legitimate, some are frauds in which con artists sell shares they do not actually have,” FINRA said in a news release. “Recently, FINRA became aware of potentially fraudulent schemes to sell purported shares of Facebook.”