Facebook may be forced into IPO by 2012

[bb88]

http://www.todayonline.com/Business/EDC1...PO-by-2012

Facebook may be forced into IPO by 2012
11:55 AM Jan 07, 2011
SAN FRANCISCO - Facebook, the world's largest social-networking company with more than 600 million users, will start disclosing financial data or hold an initial public offering by April 2012, the Wall Street Journal reported, citing a private-placement memo.

Facebook expects to surpass the 500-shareholder limit this year, triggering a United States Securities and Exchange Commission rule that requires privately held companies to release financial details, according to the newspaper.

When companies have more than 500 shareholders, they can choose to remain private and keep their stock from trading publicly. However, most companies facing mandatory disclosures opt to go public. Google hit the 500-shareholder threshold in 2003 and went public in 2004 at an offering price of US$85 per share. Google shares closed at US$613.50 yesterday.

Facebook has been avoiding discussion of when it might go public, giving investors the impression that it wants to stay private as long as possible. At a tech conference last year, chief executive Mark Zuckerberg said: "Don't hold your breath."

But things have since changed. The company is holding a private share offering through Goldman Sachs, a move that has shed light on Facebook's financial results and plans. Goldman Sachs and funds managed by the firm have invested US$450 million ($580 million) in Facebook, according to an offering document sent to potential investors this week. The firm also has an arrangement to let clients make additional investments of as much as US$1.5 billion.

Facebook had US$1.2 billion of revenue and US$355 million in profit during the first nine months of 2010, according to The New York Times, which cited documents sent to Goldman Sachs clients.

Facebook, once expected to go public in 2011, was already expected to put that off until 2012, three people familiar with the matter said last year.

Spokesmen for Facebook and Goldman Sachs declined to comment. AGENCIES

Anyone have any view or words of wisdom?

[brattzz]

facebook revenue is ads income rite?

If kanna IPO, then more ads? then users will move away liao....

[arthur]

2012 -> Everyone is so excited about the stock markets. You find your colleagues looking into their iphones or computers for quotes every single min.
Facebook launch --> Counter rises by more than 10% in 1st hour.

3 months later, some "unknown, cannot be predicted by World Bank economists or government ppl" crisis struck.
World indicies fall like nobody biz.
FB price goes to a low. Many ppl tried asking why?? Some curse their fate, other curse their brokers while some may even try jumping.

The cycle repeats itself again yrs later... Human psychology will never change.

Having said all these, Facebook prowess lies in the data it collects from each and everyone of us, our favourites, our likings and dislikes, and even our friends connection. Its the world largest "gold mine" in the marketing industry.

[bb88]

http://www.channelnewsasia.com/stories/a...39/1/.html

NEW YORK: Wall Street sentiment is mixed over Facebook's financial prospects as the privately held social-networking website faces a possible entry into the market next year.

A memo distributed to potential investors in Facebook shares sold by Wall Street investment bank Goldman Sachs suggested the emerging Internet giant earned about $500 million last year on sales of nearly $2 billion.

"The document disclosed says $355 million of operating profits for $1.2 billion for the first three quarters" of 2010, said Lou Kerner of Wedbush Securities, a brokerage that owns Facebook shares.

"We know the revenues were ramping (up) significantly. We think the revenue approached $2 billion by the end of the year," Kerner said.

"We were surprised by how profitable they were at this early stage of their growth."

Kerner said that Facebook would grow and benefit from economies of scale, increasing its profit margins.

"Given they are at 30 per cent margin now it's probably conservative to think that they can reach 40 per cent margin as they scale into the tens of billions of dollars of revenue from the $2 billion revenue they had in 2010."

The analyst projected Facebook would have profit margins topping other Internet giants, such as search titan Google.

The privately held Facebook makes money by selling advertising on its website and by "Facebook credits," a virtual cash subscribers can use to buy games and applications, instead of using credit cards.

Kerner said the company earns hefty 30 per cent commissions on that virtual money.

Facebook has been in the spotlight since US media this week revealed Goldman Sachs had invested $450 million in the company, alongside a $50 million investment by Russian firm Digital Sky Technologies.

The deal values Facebook at $50 billion dollars, more than companies with much larger revenue, like Time Warner.

Goldman reportedly closed a $1.5 billion offering of Facebook shares after receiving billions of dollars in orders from its wealthiest investors as well as its own executives.

According to Wedbush's Kerner, the shares have actually been trading privately for quite a while.

"The latest trades have been in the $60 billion range," he said.

"So Goldman is actually getting a discount."

Gregori Volokhine, director of Meeschaert New York, was cautious.

Facebook's profit margin level did not surprise him because "it's a sector where the expenses aren't enormous, it's not a heavy industry."

But, he said, "a value of $50 billion for $500 millions earnings means you're paying 100 times profit, while a publicly traded firm like Google has a price-to-earnings multiple of only 21."

"They (Facebook) must quickly transform $500 million into $3 or $4 billion," he added.

The New York Times reported Thursday that Goldman had offered Facebook shares to its powerful internal investment group, Goldman Sachs Capital Partners, which turned down the chance.

"That doesn't show skepticism, for Facebook is extraordinary, but it is all about the price," Volokhine said.

The fast-growing Facebook website, co-founded and headed by Mark Zuckerberg, has more than 600 million members worldwide and more than 300 shareholders, according to Kerner.

If Facebook surpasses 500 shareholders, it will be legally required to begin providing financial information to the Securities and Exchange Commission.

Speculation increased that Facebook will launch an initial public offering of shares in 2012. Zuckerberg has resisted pressure to take his company public.

-AFP/ac