Facebook May Be Required to Disclose Financials or Go Public

By Chris Preimesberger  |  Posted 2011-01-06 Print this article Print

Because it is nearing the SEC's 500-private shareholder threshold, the social network may need to start supplying its financials to the public by 2012.

Few people outside the inner core of Facebook leadership really know much about the income, profits and cash flow of the world's largest and most successful social network, but that will soon change.

The Wall Street Journal reported Jan. 6 that the Palo Alto, Calif.-based Web services network will be required by federal securities law to publicly disclose its internal financial information or schedule an initial public offering by April 2012, because it expects to cross the 500-private shareholder legal limit at some point this year.

The Journal reported that a private-placement memo is being distributed to potential investors in Facebook. A Facebook press representative declined to comment in response to a query by eWEEK.

CEO and co-founder Mark Zuckerberg has made it clear numerous times that he is not interested in taking Facebook public, but he may have to rethink that position. He also has turned down a handful of offers to sell the company in the last three years.

The U.S. Security & Exchange Commission's 500-shareholder disclosure regulation requires companies to begin publicly disseminating financial information 120 days after the end of their fiscal year, which for Facebook falls at the end of the calendar year in December 2011. This makes April 2012 the first month in which the company would have to start disclosing its financials.

Facebook, which is closing in on 600 million registered members, has been building corporate value steadily since its launch by Zuckerberg in 2004. Two years ago, the company attracted an initial $200 million investment from Russia's Digital Sky Technologies, which recently increased that to a total stake of about $500 million.

Wall Street investment firm Goldman Sachs reportedly has invested $450 million into Facebook, according to the New York Times. The combination of all of its private investments unofficially has the company valued at about $50 billion, easily ranking it as one of the most valuable companies in the world.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on Salesforce.com and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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