Facebook may be forced into a 2012 IPO by the Securities and Exchange Commission. Image: Flickr / MoneyBlogNewz / CC-BY
A new ruling by the Securities and Exchange Commission means that there could well be a Facebook IPO in 2012. The Securities and Exchange Commission is taking a hard look at the company because of the number of private investors. By 2012, Facebook will have to have an IPO or start disclosing financial details.
500 investor limit forces Facebook IPO for 2012
There are two major types of companies. Publicly traded companies buy and sell stock on public markets and are regulated by government and economic bodies. Financial information of public companies is also considered public. A private company can have up to 499 individual investors, and can keep its financial information entirely hidden from the public. If a company reaches 500 individual investors and $10 million in assets, government regulation requires the company to disclose a significant amount of financial information. Facebook is quickly reaching the 500 investor limit and will either have to disclose financials or go public.
Trying to avoid a Facebook IPO
Facebook, which is six years old, has taken several steps to try to avoid going public. Facebook has quit issuing shares to its employees, instead issuing “restricted stock units” that only have value if the company goes public or is sold. This limit of 500 investors, though, hasn’t held back the trading and valuation of Facebook. Private stock exchanges have been flooded with Facebook stock lately, and Goldman Sachs has valued the company at more than $50 billion. Microsoft also owns 1.6 percent of Facebook, which it paid $240 million for in 2008. In short, a Facebook IPO in 2012 is something the company is trying to avoid but investors are salivating over.
Other growth plans for Facebook
Though the Facebook IPO in 2012 is taking up much of the attention of the company and investors, Facebook is not stagnating. There are many places for expansion of Facebook’s finances outside the stock market. Facebook credits, which currently are usable mostly in games, are going to be integrated into the Facebook Connect system. The hope of the company is that this Facebook money starts getting used online like “real” money.
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