Did Facebook Just Announce the Date of Its IPO?

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Facebook has sent the "clearest sign yet that it is preparing to take itself public sometime next year," The Wall Street Journal reports. The paper cites a document the company circulated to Goldman Sachs clients indicating that Facebook intends to boost its number of shareholders beyond 500 this year. This would compel the company, per Securities and Exchange Commission regulations, to begin disclosing its financial information by April 2012, 120 days after the end of the current fiscal year. Private companies that bump up against the SEC rule often elect instead to cash in and list their shares on a public stock exchange.

Speculation about Facebook launching an initial public offering has heated up in the wake of Goldman investing $450 million in the social networking giant--and promising to raise another $1.5 billion from its wealthy clients--in a deal that valued Facebook at $50 billion. Sources tell the Journal that Facebook is working with an investment bank on a benchmark valuation for a potential IPO next year and is "keen on a 'round-number' valuation of $50 billion."

Is a public Facebook only a year or so away?

  • Not Necessarily, cautions Henry Blodget at Business Insider. Crossing the 500-shareholder limit "does NOT mean the company has to go public," he says. "All it has to do is file financial statements. So the crazed masses who are being shut out of Goldman's 'private Facebook IPO' may even then still have to watch from the sidelines."
  • Facebook Might Pull Out Some Last-Minute Tricks, explains Anthony Ha at VentureBeat, "Facebook might cross the [500-shareholder] threshold but then buy back enough shares to go under again," he says:

Does the [Goldman] funding set the stage for an IPO, or is it a way for Facebook to stay private? The memo presents strong evidence in the “IPO” column, though John Coffee, a law professor interviewed by the Journal, notes that Apple and Google both started reporting their financials publicly “well ahead of doing an IPO.”

  • It Will Go Public, states Chris Nerney at ITWorld.

Facebook previously has said not to expect an IPO until at least late 2012, so this isn't out of the blue. But it appears the fast-moving events of the past week have forced Facebook's hand. Or perhaps made its investors conclude that demand for an IPO was peaking ...

Clearly the trade-off is capital and payout (IPO) versus control (staying private, and with a small number of investors), with some risk management thrown in. But in the end this is a money game, so I think we can count on the public offering.

  • I Think So Too, and It's About Time, says Adam Clark Estes at Salon. "Everybody wants a piece of Facebook, right? Otherwise, the social network wouldn't be looking at hitting 1 billion users--or one-sixth of the world's population--in the next year or so. Why shouldn't all of these people be able to buy a share of the company they built ... And so Zuck's famous stance on privacy suddenly sounds kind of ironic vis-á-vis his hesitation to show his balance sheets."

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