Social network will cross the critical 500 shareholder mark by end of 2011, which will force it to file financial data with SEC even if it does not choose to raise $10bn in IPO
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 networkingcompanies on special, secondary-market exchanges.
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