[sterling312]

Regarding to the second quote, the statement just shows how the analyst doesn't get the situation at hand at all. Traditional firms uses IPO to gain cash and expand, true. That is because it is very hard to raise money in that scale using other methods. In the case of Facebook, with over $1B revenue, it can easily raise cash from other forms of investment (hey, who wouldn't want to own a piece of Facebook at this point?). Instead, what the IPO really does it introduce the pricing of Facebook to the market, which in turn hopefully reduces the volatility of the price. Who gets the most benefit out of this? The investors! Facebook is going to get cash one way or another; it is the investors who gets the most benefit out of its IPO. So Zuckerberg can do whatever he wants. The only ones he has to show respect to are the consumers that uses Facebook, frankly.

[veyron]

Mentioned it a few times in other threads, but it clearly needs to be reiterated: http://news.ycombinator.com/item?id=3753915

For posterity's sake let's make this clear: the SEC rule regarding 500 owners is as follows:

> Companies with more than $10 million in assets whose securities are held by more than 500 owners must file annual and other periodic reports. These reports are available to the public through the SEC's EDGAR database.

Source: Securities Act of 1934, paraphrased in http://www.sec.gov/about/laws.shtml

It requires firms to file special reports. The reason why people presume that it means that the firm must go public is simple: there are only a few additional requirements to go public, and the economic advantages in many cases outweigh the paltry effort.

For posterity's sake, this is worth repeating: THERE IS NOTHING FORCING A FIRM TO GO PUBLIC. NOTHING.

[surrealize]

You're missing the point. Facebook might not have been "forced" to go public, but they still don't really need the cash from the IPO. And there are undoubtedly lots of bankers who would kill to be in on the facebook IPO.

So the banker who expected Zuckerberg to bow and scrape was still badly mistaken. Zuckerberg isn't really "asking investors for their money" in the IPO, because he doesn't really need that money. That's the point.

[veyron]

    Facebook might not have been "forced" to go public, but they still don't really need the cash from the IPO

If they didn't need the cash from the IPO why did they IPO? If they wanted liquidity for employees and investors, then they need to go public and hence should at least pay a modicum of respect (guess who is buying those shares that those investors and employees are selling?)

[surrealize]

The people buying the shares are ultimately the public; the bankers are just middlemen, and replaceable ones at that.

If facebook actually did need the cash, why wait until they hit the 500 investor limit? Hitting that limit is clearly playing a role in the timing of the IPO, even if it didn't "force" an IPO.

[veyron]

Facebook as the corporate entity doesn't need the cash; the investors and employees need the exit. In light of that, Mark as an investor and employee does need their cash.

If the exit wasn't important, they would stay private and run the business.

[surrealize]

Sure, the extra liquidity is nice for people who hold shares. But, at the same time, the IPO is clearly not a big deal to Zuckerberg, as evidenced by 1. the fact that they've waited until now, and, yes, 2. by the hoodie.

What's the percentage of firms with >500 investors that don't IPO?

I wonder if increasing the number of investors past 500 is more about using equity as a recruiting/retention tool than it is about cash.

[hkmurakami]

Facebook plans to have more than 500 "investors", which means that they will have to disclose their financial results anyways, regardless of whether they remain private or not[1]. Given this situation with respect to financial regulation, you might as well become public since you don't gain anything by remaining private. You could say that Facebook is "forced" to go public against their ideal wishes. Little wonder why they wouldn't be coming to Wall Street begging for money.

[1]Facebook revealed in a document sent to potential investors in early 2011 that it was planning to increase its number of shareholders to more than 500. This will force the social networking site to either disclose a lot of financial information or go public by April 2012 -- which is 120 days after the end of Facebook's last fiscal year[2]. Typically the forced disclosure of financials triggers companies to go public, listing their shares on an exchange and, hopefully, cashing in. - http://www.wired.co.uk/news/archive/2012-01/31/facebook-ipo-...

[2]The 500 shareholder threshold forces companies that have more than 499 investors to divulge information about their financial performance. Although the company may still remain private, it must file similar documents to those of public companies. If the number of investors falls back below 500, then the disclosures can be omitted. - http://www.investopedia.com/terms/5/500-shareholder-threshol...

[veyron]

As I mentioned here (http://news.ycombinator.com/item?id=3954910) they are not forced to go public. Plenty of private companies with > 500 shareholders stay private precisely because they dont want to have to deal with wallstreet. Facebook could have chosen to do the same, but instead they chose to go public and engage with wall street.

[hkmurakami]

Perhaps they figured that there was no downside to going public, if they had to disclose their finances anyways? If Zuck has 56% of the voting power, and other former and current Facebook employees have significant shares as well, then it's quite possible that even with the IPO, Wall Street won't have much sway in the company's dealings regardless.

(I am personally a big fan of Costco for rebuffing Wall Street's cries for higher prices and lower worker compensation and benefits)

[mkopinsky]

Was the parent edited, or are you arguing a straw man?

[_feda_]

You might think facebook needs to show respect to it's users, but clearly it doesn't. The relationship between them is one where facebook feels free to abuse their user's trust in the service by being awkward and unfair with their personal data.

[mbesto]

This.

And we can speculate all you want, but I'm under the impression that Facebook is primarily doing an IPO, because the SEC is forcing them to do so (500 investor rule). That and well, I think some people want to get paid.