Social media giant Facebook, sets its own rules, even in turbulent economic times. While companies like, group-dealer, Groupon and, game maker, Zynga have delayed their IPOs courtesy the adverse economic conditions, the social network is delaying its IPO for internal reasons of its own, reported the Financial Times.
Facebook’s public debut which was expected either early next year, or even this year by some overly-optimistic people, has now been apparently pushed to end of 2012. Private share valuing of Facebook is at more than $ 66.5 billion.
People close to the company have let it out that Facebook’s CEO, Mark Zuckerberg, desires to wait till next September or later so as to keep employees focused on product developments rather than looking for a pay-out. Supposedly, some employees are keen to cash out in an IPO, but the CEO wants to retain them until next summer in order to complete certain feature rollouts.
Commending the decision, Lise Buyer, a consultant who advised search engine monolith, Google, through its IPO said, “There is really no reason to rush a deal. The company does not need the money. It is a little easier to focus when you are private. They will go when they are good and ready, not before.”
A prominent Facebook investor, Peter Thiel said that it was generally desirable for technology companies to defer going public for as long as possible. He quoted Google’s example which did not go public for six years until it had dominated the search engine business. “It is a good competitive strategy and orients people towards long-term value and not quarterly numbers,” he said.
The ‘500 rule’ or section 1934 of the Securities and Exchange Act states that once a private company has more than 500 investors it must release quarterly financial information to the Securities and Exchange Commission (SEC) in the first quarter of the following year. Facebook surpassed the 500 investor – perimeter in January when Goldman Sachs became an investor. This implies that Facebook will have to publish its financial results by April 2012.
Even after publicly disclosing its financial results, companies are not obliged to go public but many companies seize the opportunity, in order to, take advantage of the market interest generated by such disclosures.
Though, as of now, Facebook does not publish its financial performance data, it was recently reported that the social network had generated revenues of $ 1.6 billion in the first half of this year, which is twice that of the previous year.
If we need a perspective, we could look to Google, which had filed its first financial statements in April of 2004, which was the last date for the filing and had come out with its IPO in August of the same year.
Though it is clear that Facebook is not in any hurry to go public, it may be motivated to do so in order to increase employee compensation. Last year, the company had barred employees from selling theirs shares to other private investors. To provide an incentive to the employees so that they can sell their stock in the open market, if they want to do so, rather than quit, Facebook will have to speed up the IPO process.
It is expected that Facebook’s IPO valuation could reach upwards of $ 100 billion if it can manage to keep ahead of the competition till the time it goes public, thereby setting a new benchmark for technology companies.
In midst of all these speculations, Facebook refused to comment on the matter.