Facebook Likely to Delay IPO
When LinkedIn started trading on the New York Stock Exchange in May this year, speculation was rife that other social media companies would do the same. It had been seven years since Google went public, and investors appeared to be eager to enter the realms of uncharted territory presented by the social media sector of information technology. Other social media companies that were targets of speculation included Twitter, Groupon, Zynga and FaceBook. Certainly, LinkedIn’s foray onto Wall Street generated a few surprises as its pre-IPO price climbed to $45, with its first day of trading seeing an intra-day increase to $122.70, before retreating somewhat to close at $94.25 per share.
Although investors had been hopeful that Facebook would launch its IPO in the United States before the end of the year, or in April 2012 at the latest, there have been indications that plans for trading on the stock market will only take place toward the end of next year. It’s been reported that the reason for the delay is that Facebook’s Chief Executive, Mark Zuckerberg, wants employees to remain focused on developing new products, rather than being distracted by the anticipation of financial gain. So while other social media and internet companies are citing financial and market turbulence as their reasons for putting IPO plans on hold, Facebook appears to be making its plans in the best interests of company development and maintaining market share in a highly competitive environment.
PayPal co-founder and prominent Facebook investor, Peter Thiel, has been reported as saying that deferring an initial public offering for as long as possible is a good strategy for technology companies. However, as per SEC regulations, when a company has more than 500 shareholders it is obliged to make its financial results public in the first quarter of the year following this milestone. With Goldman Sachs becoming a Facebook investor in January this year, Facebook will have to make its financials public by April 2012. Although companies are not obligated to go public at this stage, many take advantage of market interest generated and launch their initial public offering. Some analysts are of the opinion that Facebook is likely to follow this route, while others believe that Facebook may choose not to go public as doing so may put them at risk of losing talented and innovative product developers who may take advantage of an IPO by cashing out their shares.