Business

Facebook-fueled fund rides pre-IPO high

As Facebook sails toward its expected springtime public offering, most of Wall Street is in a lather over the revenue and profits Mark Zuckerberg’s social network behemoth will create.

But in some precincts of the financial world, where small investment banks and broker-dealers have made large fortunes by gobbling up privately held shares of Facebook, LinkedIn, Groupon and other red-hot tech companies and then just sitting on the assets while the firms doubled and tripled in value, executives are sad to see Facebook’s IPO.

“Facebook’s public play is an undeniable loss, but the company hopes to find another equally hot early-stage tech company to invest in to keep its clients happy,” said one exec close to New York-based Felix Investments, one such small investment bank that started investing in Facebook when it was valued at about $15 billion.

But that doesn’t mean Felix is ready to just wave goodbye to the Facebook money machine.

Felix’s Frank Mazzola, sensing Facebook’s IPO shares are going to be a scarce and prized commodity, is offering investors a chance to invest in his fund at pre-IPO prices to take advantage of the expected run-up once they start trading. And investors are proving hungry for such a chance, snapping up shares in the fund, sources close to the company said, even though they will have to pay 20 percent of any upside to Felix.

Facebook shares more than doubled last year from about $15 a share to $30, according to a recent report from Nyppex, a firm that also helps investors track private shares. In fact, since Facebook filed for its IPO last month, its shares have risen in price. Felix lately upped its offering price from $34 to $37, according to an investor who considered buying shares.

Mazzola’s aggressive sell of Felix’s pre-IPO tech shares has gained the firm not only success and huge profits, but also unwanted scrutiny from regulators.

The Securities and Exchange Commission hit Felix with a Wells Notice, suggesting it is looking into some of its tactics. Last week, another private shares firm, Chicago-based Advanced Equities, where Mazzola worked until starting Felix in 2009, also received a Wells Notice.

gsloane@nypost.com