It didn’t take long for the news to spread across the internet: Facebook isn’t going public as soon as the world expected. The white-hot social media company, which could be worth close to $90 billion (depending on who you ask), was originally expected to file its IPO paperwork with the SEC in the fourth quarter of 2011 and make the big move by April 2012.
According to an FT.com report (as well as other outlets), this isn’t going to happen. Apparently, Facebook is more likely to pull the trigger in September 2012, and we probably won’t get to take a peek under the hood until April, when the company will have to file with the SEC because it has more than 500 shareholders.
So, why is Facebook waiting? At this stage of the game, of course, it’s all speculation. But, there are a few reasons that are pretty easy to pull out:
1. Market conditions: The first half of 2011 was great for the IPO market. It was supposed to be the best year since 2007. Then, with the downgrade of U.S. debt in early August, things got ugly. Twenty-one IPOs were pulled last month, and celebratory opening bells were figuratively silent. Facebook is expected to have a strong showing regardless of market conditions (within reason, of course), but it is easier to pull the trigger when the market isn’t so volatile.
2. Motivation: when you wave a big payday in front of employees, it’s easy for them to get distracted. Facebook CEO Mark Zuckerberg is said to be putting off the IPO as a way to help his employees stay focused on their jobs.
3. Money for some: Facebook employees may want their riches, but Facebook itself probably doesn’t need them. Since it doesn’t need the capital to grow, it doesn’t need to grow public. With an IPO comes not just the challenge of dealing with investors but also an obligation to make their investments more productive. If Facebook raises capital by going public, it should have some uses for all that money in mind.
4. Disclosure details: once Facebook files with the SEC, all its secrets are out. Regardless of whether it goes public, Facebook will have to file in April 2012 because it has more than 500 shareholders. But, that doesn’t mean the company has to go public in April. Rather, it can go public a few months later, as it would have to disclose its financials ahead of an IPO anyway (i.e., kill two birds with one stone).
5. Clean up: Facebook is bound to excite, and it does much well. The company does need to clean up its business model a bit, however, to be more attractive to investors. Better revenue stream diversification, a few more features and a demonstrable growth trend over a strong 2011 would be assets to the company when it’s meeting with potential investors ahead of an IPO.
Yes, it’s coming. Yes, it’s exciting. Unfortunately, we’re going to have to hold on for a little longer than we expected. Nonetheless, a Facebook IPO is on the horizon.
Photo: Inside IPO