The word on the street is that Facebook is readying itself for a public flotation in the early months of 2012.
That, in itself, is hardly surprising, given that there have been rumours for some time now that this was likely to happen. What is surprising though is the suggested figure that the IPO could net the social networking site over $100 billion. Even more surprising is the fact that this ‘leaked’ announcement comes just days after ComScore statistics indicated that the influence of the social media giant was on the wane, though naturally Facebook vigorously denied this. So, is there any truth in this latest rumour, and if so, why plan for public flotation now? What’s the rush all about?
First of all, let’s deal with the statistics that seem to indicate that the public is falling out of love with Facebook.
ComScore’s figures highlighted that new sign ups to the social media platform were tailing off rapidly following 2 consecutive months of decreased growth. 100,000 users in the UK had deleted their accounts, and in the U.S. 6 million users had done likewise. So, is Facebook’s light fading? Well, not according to a spokesman for the platform:
“From time to time, we see stories about Facebook losing users in some regions. Some of these reports use data extracted from our advertising tool, which provides broad estimates on the reach of Facebook ads and isn’t designed to be a source for tracking the overall growth of Facebook. We are very pleased with our growth and with the way people are engaged with Facebook. More than 50% of our active users log on to Facebook in any given day.”
So, with that rumour quashed, why is Facebook planning the flotation now?
Well, there’s an argument to say, why not now? It’s as good a time as any, and if the experience of LinkedIn’s flotation is anything to go by, perhaps it is best to strike whilst the iron’s hot. Yet, there’s more to it than that. There’s every likelihood that should the public flotation happen next spring, then it would be because it was triggered by the so-called ‘500 rule’ under the 1934 U. S. Securities and Exchange Act. The rule, in essence, states that once a private company has more than 500 investors, it must begin to release a quarterly financial statement to the Securities and Exchange Commissioners, just like public companies do.
Facebook has already indicated that it expects to pass this ‘500 mark’ later this year, so a public flotation next spring makes sense, as it’s believed the company are non-too-keen on releasing the financial information imposed by the act. Naturally Facebook has declined to comment on whether the rumours are true, and will certainly not be drawn about timeframes, yet Chief Operating Officer, Sheryl Sandberg, had already stated earlier this year that a public flotation was ‘inevitable’ and ‘the next thing that happens.’ The one thing that is almost certain is that, should the IPO happen, Goldman Sachs will be in the driver’s seat to underwrite it, having already invested over $450 million in the platform earlier this year.
So will it happen? Maybe.
Is it worth that amount of money? Well, that depends really: the relative value of anything is only determined by how much people are prepared to pay for it. If investors think it’s worth that much, it will sell for that amount and maybe even more. Still, one other point is worth mentioning. Facebook’s value is in many ways determined by growth forecasts and predictions. It has been estimated that by 2015, Facebook’s global audience will have reached 7.3 billion: unfortunately experts are also predicting that the world population in 2015 will only be 7.2 billion. Now that is really what you call global domination.