Facebook May Be Required to Disclose Financials or Go Public

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.