Facebook says no IPO in 2009

A piece I wrote on what a recently oversubscribed buyback means for Facebook's IPO got an animated response from Facebook spokesperson Larry Yu. The most important takeway for me was that Facebook will not have an IPO in 2009 and isn't even close to doing so. However, the devil is in the details and Yu does not deny Facebook could file the S1 precursor to an IPO this year.

Larry's reply was interesting, although his logic doesn't make complete sense to me. So I'll reprint in entirety below. and explain my confusion after the jump. I do give Larry credit for stating his case strongly.

I was quite shocked by your speculative piece on Facebook's IPO. First and foremost, to state Facebook expects to go public "this year" is completely wrong. As you well know, the typical timetable for an IPO (from the S1 filing to the actual share offering) runs six to nine months. This claim, therefore, is predicated on the notion that filings and other activities started months ago, which is simply not the case."
This fundamentally affects the entire premise of the story. Next, to assert that employees "were heading for the exits" and selling shares is a "very bad sign" makes a broad characterization - one you undercut later in your piece by describing the buyback as relatively small. It's a well-worn, intelligent practice to diversify an asset base. After a company goes public and the typical six-month lock-out period for employee stock sales expires, for example, it's very common to see people sell shares to diversify. To ignore this convention and instead conclude there's something amiss in the absence of any meaningful data is misleading. I encourage you to reach out to us for future stories via press@facebook.com. Some information is confidential and we may not be able to provide everything you need, but we will certainly try. At the very least we can share the facts and offer some guidance to help round out your thinking."
Larry, I appreciate your reply but I think my analysis is pretty good here. First, you have some contradictory logic in your reply. Employees do indeed seek to diversify their holdings. But most do not get the opportunity to do so pre-IPO. Since the IPOs for hot tech issues are usually quite underpriced by underwriters in order to accommodate institutional investors who want to get share allocations and easy profits, most savvy employees of tech firms heading for IPOs would rather have bamboo shoved under their fingernails than part with their pre-public shares.

In our email exchange, I noted that Google did not suffer from employees seeking pre-IPO exits during their private days. Larry offered a reply in a subsequent email. "On the Google point, I get the spirit of your position. But I think it's an apples-to-oranges comparison. Back in '04, the economy was on the rise and we're obviously in a different economic climate now," wrote Larry. Yes, I agree. And that can't be a good thing for a Facebook IPO, right?

As for the possibility of Facebook going public in 2009, Larry is correct in the timetable. That said, while S1's are generally filed six to nine months ahead of an IPO, this is not a hard and fast rule and some companies have gunned it in order to capture market sentiment quickly. At any rate, I'd like to thank Larry for engaging in the debate -- its something many company PR departments won't do and he definitely won bonus points on our end.
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