Not Coming Soon: Facebook, the Public Company

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facebook_small.jpgADOTAS – What? Did you really think Goldman Sach’s $450 million investment in Facebook meant an IPO was imminent? Did you also believe that a fat man in a red suit squeezed down your chimney last month to leave you presents?

The monumental investment signals that Goldman will likely underwrite the eventual Facebook IPO, but only when CEO Mark Zuckerberg clears it for takeoff — and that flight looks to be delayed for quite a while.

The cash injection gives the social network the funds it needs to compete with public rival Google, but Zuck pretty much keeps the helm to himself — he’s laying across three of the five board of directors’ seats (fed grapes, Roman-style?) and it’s speculated he owns a quarter of the operation.

As “The Facebook Effect” author David Kirkpatrick explains, “[Zuck] fears, rightly, that to have public Wall Street shareholders breathing down his neck after an IPO would almost certainly inhibit his ability to move quickly to counter the innovations of others and to continue growing Facebook.”

Goldman’s wealthy clients won’t have much of a say about direction — the investment bank’s stake is less than 1%. Instead, they’ll be thanking their lucky stars that they found a scalper for the hottest social media ticket.

We’re a long way from the dotcom bust of the late ’90s, Toto, where half-baked Internet companies sprinted for IPOs for cash infusions. Now the up-and-coming web tech firms are staying private as long as possible, soaking up seemingly limitless venture capital.

Business Insider’s Henry Blodgett explains that part of what’s changed is the trickier rules for IPOs embedded after the dotcom bust, but this kind of behavior seems limited to the social media class — Twitter, Zynga, Groupon, etc. Lise Buyer, principal of the Class V Group and a Google exec during its IPO, commented to NYTimes Dealbook that “[i]f you are a semiconductor, or a biotech company, or an enterprise software company, you are not going to have investors throwing money at you without any disclosure.”

Through non-disclosure — speculating on Facebook’s revenue has become a spectator sport — the social network has thus far avoided regulatory scrutiny. On the surface, it would seem Goldman’s plan to sell units rather than shares through a “special purpose vehicle” would also sidestep the Security Exchange Commission’s 500-shareholder rule for private company reporting.

However, Steven M. Davidoff points out on NYTimes’ Dealbook that Facebook has definitely hit the $10 million in assets threshold. It’s only a matter of time before Facebook will have to start reporting to the SEC, and that’s likely why the investment hit in the new year — Davidoff explains:

“[I]f a company exceeds the 500-shareholder limit, then it is only required to start reporting within 120 days of the last day of its fiscal year it exceeded this amount. If Facebook has a fiscal year that coincides with the calendar, this would give the company until May 2012 before the requirement takes effect.”

When faced with the same situation, Google founders Sergey Brin and Larry Page decided to go public.Will Mark Zuckerberg do the same? For a point of reference, consider that Google was valued at $50 billion — Facebook’s valuation with its recent funding — six months after it had gone public. At Google’s IPO, it was valued at $27 billion.

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