IPO looms for Facebook

Social networking giant Facebook could file for an initial public offering as early as next month, reports suggest, with an expert saying start-ups can learn from the timing of the rumoured IPO.

It’s been reported Facebook founder and chief executive Mark Zuckerberg will go ahead with a Facebook float in the first half of next year, in what could be the biggest tech IPO in history.

According to an article published last week by Business Insider, Zuckerberg has told his staff the IPO is “coming” although no date has been set.

The article also states that 75,000 Facebook shares fetched $US30 each at auction. Facilitated by SharesPost, the trade values the company at around $US70 billion.

However, this is down significantly from June and July, when SharesPost was facilitating transactions at $US35 per share, estimating Facebook’s value at up to $US84 billion.

Falling prices and trade volumes are thought to be making Facebook employees increasingly nervous about the value of their personal holdings.

One the company goes public, many Facebook employees will become millionaires overnight, so there is a growing sense of urgency.

One issue that could force the company’s hand is the limit of 500 shareholders imposed on private companies.

Facebook must show the Securities and Exchange Commission it is below that threshold before the end of April if it wants to delay an IPO.

Reid Hoffman, chief executive of professional networking site LinkedIn, predicts a Facebook IPO is likely in the first half of 2012.

“I suspect that Mark will choose to go public because the company has to put in a lot of financial work in order to make the necessary filings,” Hoffman told the UK’s Sunday Telegraph.

“He might as well make sure he benefits employees and ultimately the company from the level of work that’s already involved.”

“Going public would benefit Facebook in lots of ways – namely having public currency to do acquisitions – so Mark might as well get the benefit as well as the cost.”

“Given that logic, I would suspect that some time in [the] first half of next year he will engage in the IPO process.”

Hoffman says it could be the largest ever consumer technology IPO. To date, no company has trumped tech giant Google, which raised $1.7 billion when it filed its IPO back in 2004.

Importantly, Hoffman believes companies are approaching IPOs differently nowadays.

“The pattern 10 years ago was to float as soon as you could. The pattern now is to build a lot of inertia in your business… This will lead to a high-tension IPO with a robust valuation,” he says.

Meanwhile, Zynga – the maker of highly popular Facebook games such as Farmville and Mafia Wars – is also expected to file for an IPO later this month.