January 06, 2011, 6:26 PM — On the very day we learned that LinkedIn was planning an initial public offering, the Wall Street Journal on Thursday reports that Facebook soon will exceed the shareholder limit that allows companies to avoid reporting financial results. Bottom line: Facebook "will be forced to begin disclosing financial information or stage an initial public offering by April 2012."
The WSJ says it's getting the information from a 100-page private-placement memo going out to potential Facebook investors.
Facebook previously has said not to expect an IPO until at least late 2012, so this isn't out of the blue. But it appears the fast-moving events of the past week have forced Facebook's hand. Or perhaps made its investors conclude that demand for an IPO was peaking.
On Dec. 28, the WSJ published an article on the growing market for ownership of private technology companies, focusing particularly on Facebook, which apparently was red-hot in the private-shares exchange market. The day before, the New York Times DealBook reported that the Securities and Exchange Commission was looking into the world of trading private shares, but offered few specifics.
Then, over the New Year's weekend, Facebook announced that Goldman Sachs and a Russian firm had invested $500 million in the social networking start-up. The private market kicked into overdrive, and suddenly this thing that everyone said wasn't happening anytime soon reportedly has a date (or month) on it.
Of course, once Facebook exceeds the 500-shareholder limit, thus requiring it under SEC rules to report financial and operational results, it may opt not to go public and instead register as a "reporting company."
Clearly the trade-off is capital and payout (IPO) versus control (staying private, and with a small number of investors), with some risk management thrown in. But in the end this is a money game, so I think we can count on the public offering.
And I'm sure LinkedIn, which had the "planned social networking IPO" spotlight for less than a day, is just thrilled with this news.
Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.