guardian.co.uk,
Charles Arthur and agencies, Tuesday 29 November 2011
 |
| Facebook chief executive Mark Zuckerberg is said to be preparing a $10bn flotation for spring 2012. Photograph: Justin Sullivan/Getty Images |
Facebook,
the world's largest social network, is preparing for a public stock offering
next spring which could raise up to $10bn, according to sources.
The Wall Street Journal reported on Monday night that the company is hoping that the
IPO, which has been long rumoured, would value the company at around $100bn.
Facebook's
chief financial officer, David Ebersman, had discussed a public float with
Silicon Valley bankers, but founder and chief executive Mark Zuckerberg had not
decided on any terms and his plans could change, the Journal said.
The social
network, which now claims more than 800 million members worldwide after seven
years of explosive growth, has not selected bankers to manage what would be a
very closely watched IPO.
But it had
drafted an internal prospectus and was ready at any moment to go for a flotation,
the Journal said, citing "people familiar with the matter" – a
standard form of words for insiders at the company.
At $100bn
valuation, the company started by Zuckerberg in a Harvard dorm room would have
double the valuation of Hewlett-Packard.
A formal
S-1 filing could come before the end of the year, though nothing was decided,
the Journal added.
A Facebook
representative declined to comment.
One matter
which could force Facebook's hand is the number of people – especially
employees – who have received stock options as an incentive for working at the
startup. The Securities and Exchange Commission (SEC) says that "a company
must file financial and other information with the SEC 120 days after the close
of the year in which the company reaches $10m in assets and/or 500
shareholders, including people with stock options".
Google was
forced to file for an IPO in 2004 after it passed the 500 shareholder figure.
It is unclear how many of Facebook's 3,000 staff are shareholders, but the
company said in January that it will exceed 500 shareholders this year, and
that in accordance with SEC regulations, it will file public financial reports
no later than 30 April 2012. That will be obligatory even if it does not file
for an IPO.
Facebook
does not disclose its financial results, but a source told Reuters earlier this
year that the company's revenue in the first six months of 2011 doubled
year-on-year to $1.6bn (£1bn).
If it does
debut in 2012, Facebook's IPO would dwarf that of any other dotcom waiting to
go public.
Farmville
creator Zynga has filed for an IPO of up to $1bn. In November, the daily deals
service Groupon debuted with much fanfare – only to plunge below its IPO price
within weeks. It is now one of the worst-performing technology flotations ever.
LinkedIn
and Pandora, which also floated this year, are now also trading significantly
below the levels their stocks reached during their public debuts.
Facebook
has become one of the world's most popular online destinations, challenging
established companies such as Google and Yahoo for consumers' time and for
advertising dollars.
Eric Feng,
a former partner at venture capital firm Kleiner Perkins Caufield and Byers who
now runs social-networking site Erly.com, said that the cash Facebook will get
in an IPO would allow it to make more acquisitions and refine or work on new
projects, such as a rumoured Facebook phone or a netbook.
Having
tradeable stock will also allow Facebook to attract more engineering talent who
might have been more attracted to the company in earlier days when it was
growing faster but now perhaps might be attracted to other companies. "It'll
be a powerful bullet for them," Feng said.
Investors
have been increasingly eager to buy shares of Facebook and other fast-growing
but privately-held internet social networking companies on special,
secondary-market exchanges.
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