If you feel a bit confused about the upcoming Facebook IPO, you are in good company. The company has set back the date on which it will roll out its stock several times. Current best guesses suggest that the IPO will finally occur no sooner than May of 2012.
Signs of the Impending Sale
Facebook recently announced that it had raised $500 million from Goldman Sachs and Digital Sky with a valuation of $50 billion. The group still intends to raise another $1.5 billion with Goldman Sachs through a special purpose vehicle. why is this relevant? by raising funds through Goldman Sachs Facebook may be able to circumvent some of the SEC regulations involving disclosure of finances, but it is likely that the SEC will intervene.
Once the SEC rules that the special purpose vehicle doesn’t actually prevent Facebook from having to publicly disclose its financial records, a clock starts ticking. The company will have to produce those records within four months of the end of its current fiscal year. That year will end on December 31, 2011.
What will Facebook Do in the Meanwhile?
The real goal behind the special purpose vehicle is that it provides Facebook with an opportunity to raise a lot of capital without having to implement an IPO until they are ready. Once Facebook is forced to disclose its assets it will simply go public, selling stock and increasing its financial base.
Maybe there Won’t Be an IPO at All
The prime reason a privately held company such as Facebook offers stock is to raise money. thus far Facebook has managed to raise all the funds it has needed without doing so. Microsoft is among four companies that have collectively invested $1 billion in the social networking enterprise further delaying the hoped for IPO. Continuous small offerings of privately sold shares in Facebook have kept it well funded, reducing the need to go public as well.
While it may seem as if the current funding move with Goldman Sachs should lead to an IPO, Facebook is not a company in need of cash, so the incentive is questionable. The wise investor will keep an eye on what happens in the next six months before committing any eggs to this questionable basket.
