Will Facebook Float? Perhaps in 2012!
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Facebook is a privately owned business - it’s shares are only available from private transactions in secondary markets - sometimes shares become available as early investors and employees with stock to their name decide to cash out and sell some of their equity stake. Investment firm Tiger Global is one of the main holders of Facebook stock - but as a private company Facebook must limit the number of existing shareholders to less than 500.
But the Financial Times reports that the social networking site Facebook is now worth as much as $33bn based on secondary market transactions, giving the privately held company an implied valuation greater than the market capitalisations of businesses that have already gone public on the stock market such as Ebay and Yahoo. There is a very high demand for (scarce) common stock in Facebook ahead of a possible initial public offering - like to be the biggest technology floatation since Google came to market in 2004.
An initial public offering is the first sale to the public of shares in a company, leading to a stock market listing (flotation).
Thoughts that Facebook might go public and offer shares for public sale in 2010 proved well wide of the mark. And it appears that 2012 is the more likely year for an IPO - the focus at the moment remains the growth of the business - lifting the number of users around the world (One 12th of the world’s entire population is said to have an account) and scaling up the revenue from advertising for example through the newly launched Facebook Places and the introduction of Facebook’s own payment/credits system for virtual goods.
Chief executive Mark Zuckerberg, 26, may feel that he is not yet at an age when he wants to be dealing with the intense scrutiny of stock markets when analysing to death the public reporting of Facebook financial performance. Zuckerberg has structured his board, and ownership structure, so he retains control of the company - which means that Mark Zuckerberg will decide if and when Facebook takes the Google approach and comes to the market looking to raise fresh equity capital from eager investors.
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