By Oz Litvac
Facebook is being pushed to go public.
According to CNET.com a 1964 Securities and Exchange Commission (SEC) rule is forcing the social networking company closer to going public. It will leave Facebook with no choice but to share with the world the records and relationships that made the company the giant it is today.
According to a Huffington Post article from late 2011, Facebook made nearly $500 million during the first half of 2011.
One major source of Facebook’s revenue was Zynga, whose online games produced 12 percent of the social network’s income in 2011, according to Facebook’s Initial Public Offering (IPO) filing. Zynga relies on Facebook’s wide audience for publicity and, in exchange, Facebook allows Zynga to build its own platform on top of Facebook’s.
The SEC rule states that “any private company with more than 500 ‘shareholders of record’ must adhere to the same financial disclosure requirements that public companies do.”
If Facebook is forced to make its finances public, they would experience the same loss of privacy as they would with an IPO but without the influx of new shareholders’ money. Therefore, the company might as well go public on the stock market.
However, when a company goes public, theoretically more people have control of the decision-making process within the company. This can effect the dynamics of everything from revenue flow to operations management.
This may not be the case for Facebook because they only plan on making a small portion of the company public, although their total potential revenue is estimated to be in the billions.
The privately-held company has built up much-anticipated revenue growth, but at the same time it has raised questions about whether it can adapt to fit consumer habit changes.
According to a CNET reporter, “Facebook’s proposed evaluation — which many peg at $75 billion to $100 billion — would instantly catapult the social network into the ranks of the largest companies, although it still lags far behind established top-tier behemoths Exxon Mobil, Apple, and Microsoft.”