Why does facebook have to go public?

[Sara B]

Why does facebook seem like it's being forced to go public? Obviously there are lots of benefits for those working there let alone the government through tax and wall street with some new inflated over hyped stock IPO to through money into. Especially big greedy unions but there are also obviously downsides to being public for the company let alone everyone. THere's also lots of big companies that are still private so why is facebook being required to go public? Why can't the facebook people workers & investors just keep it private?

[Abbey Davidson]

It is socail network site

[Your Uncle Dodge!]

Because the ads are moneymakers. Facebook makes a bundle off those ads and apps.

[rtfm]

Nobody is FORCING them to go public. The owners apparently see this as a way to get rich beyond their wildest dreams. Why *wouldn't* they go public?

This has absolutely nothing to do with "big greedy unions".

[Steve D]

Let's see..Facebook is non-union, so the unions have no dog in this fight. The government gets its taxes regardless of whether Facebook goes public, so the government could not care less. While Wall Street is looking forward to the IPO, they certainly did not force Facebook to go public (as if they could). Facebook workers have no say in whether or not it goes public. And the main investor is Zuckerberg who will retain control over the company while making billions. This is a Zuckerberg move, plain and simple, to cash in on the underlying value of his company. Not to mention, the money that Facebook will reap will be put to use expanding the brand and hopefully paying off in future earnings (which is usually the main reason most companies go public - to raise money to expand).

[Ryan M]

Nobody is forcing the owners of Facebook to become even more wealthy...other than the owners. What governmental agency is forcing the issue and what proof do you have?

[bpeter3196]

In a way you're correct they are being forced or pressured to go public. The reason though is because of the number of shareholders. Here's an article some what explaining it.Ultimately though a company depending on its corporate structure or the type of incorporation is limited to a certain type & number of share holders who can invest once you go over that number you are expected to become more open so the government can have better oversight to your company and employees, investors, and customers can have been safety & accountablity protections. Usually you dont have to go public but you do have to become more open and for more investors then the regular limit you then have to get permission for further investors. So ultimately you must do things that a public company has to do to be accountable & so most companies decided to just become a public company since you have to do similar things and can benefit in some ways more being a public company.

The next question is…Why does the SEC care if Facebook has 500 shareholders or not?

The short answer is to protect shareholders who are either too poor, dumb, or inexperienced to own Facebook stock.



Let us explain.

The point of forcing public companies to disclose their financials is to safeguard shareholders from scams and other fraud – to insure that investors know what they own, are about to buy, or about to sell.

But you could argue that Facebook shareholders don't need protecting.

After all, to buy Facebook shares at this point, while the company is still private, Facebook investors must be declared "accredited investors."

The SEC has the full definition, but basically, to be an "accredited investor" means you are rich, have a diversified portfolio, and understand the risk you're taking on. The only people able to buy Facebook stock from secondary markets like SharesPost, or from Facebook itself, are people who can afford to take the risk involved in betting on a company that does not disclose its financials. Goldman clients who want to buy Facebook have to have at least $2 million in the bank.

So why is the SEC so vested in protecting these people?

Basically, it's not.

Michigan law professor Adam Pritchard, one of the top securities law professors in the country, tells us the point of the 500 shareholder threshold is to protect the people who own Facebook shares AFTER these accredited investors are done with them.

Professor Pritchard tells us the government can't force accredited investors to not sell their Facebook shares and it can't really decide who these accredited investors sell their stock to. Also, sometimes these accredited investors die and non-accredited investors inherit their assets. These heirs may have to sell them.

The SEC believes that after a large-ish number of shareholders exist, it is inevitable that some of their assets will make their way into the "public" – and thus a market is born.


There's no science to the 500 number, other than it's somewhat large – large enough that people who are not "accredited investors" will end up having to make decisions about whether or not to own Facebook stock.

Given that this protective stance is the motivation behind the SEC's rule and given the way Facebook shares are flying all over the place, we think it will be no time till the SEC forces the company's hand and requires them to disclose.

Yes, we think this is the case even if Goldman is offering its clients Facebook stock in a "special purpose vehicle" only. This is based on Professor Pritchard's interpretation of SEC rule 12 g. But others disagree with us and him, and you should go read their stories too.

Anyway, after Facebook is forced to disclose, it might as well offer some of its second-class, non-voting stock to the public markets. When that happens, some early Facebook investors and employees are going to get very, very rich.



Read more: http://articles.businessinsider.com/2011...z1lv28mZEh

[Peter]

Facebook IPO will boost profits for the 1%, But the rest of us won't be sharing.