Is Facebook Finally Ready to IPO?
It's taken a long time, but Facebook may finally be ready to go public.
Sources are telling The Wall Street Journal that the fast-growing social networking website is planning to go public during the second quarter of next year.
Don't get too excited. Facebook would no longer be considered a ground-floor opportunity at this point. The company is reportedly looking to raise $10 billion in an IPO that would value Facebook at a cool $100 billion. It's a price tag that would make Facebook the country's second-most valuable Internet company, behind only Google (GOOG).
Where do you go when you're awarded the silver medal right out of the gate?
Zuckerberg's Sweet Reward
Even if you didn't catch the partly fictionalized The Social Network, you probably know that CEO Mark Zuckerberg does not suffer from a lack of ego. He was criticized for turning down buyout offers, most notably Yahoo!'s (YHOO) bid to acquire the company for $1 billion.
Zuckerberg's clearly getting the last laugh now, since Facebook is set to go public at a price that is several times over what Yahoo! is fetching these days.
It's also quite possible that Facebook doesn't even want to go public now. But an SEC rule stipulating that companies need to file their financials when they have more than 500 shareholders is kicking in. If Facebook is going to have to let the world know exactly how much money it's making, it may as well begin trading publicly.
An IPO will also help attract and retain top talent, as excessive grants of stock options to employees are what pushed Facebook over the 500-shareholder threshold in the first place.
Don't Necessarily Deny Facebook's Friend Request
The growth has certainly been impressive at Facebook. There are now more than 800 million users, with 500 million members checking in on any given day. Monetizing a free website is easy through display ads, and Facebook's likely looking for revenue to double to $3.8 billion this year, according to research firm eMarketer.
That said, investors probably have a bad taste in their mouths when it comes to dot-com darlings going public. Groupon (GRPN) went public just a couple of weeks ago, and it has already crashed through the floor of its $20 debutante price. If Zynga falters after it goes public in the coming days, it will be understandable if investors steer clear of the very companies they were dying to get a piece of earlier this year.
However, there's nothing wrong with a little sobriety. These events may actually force underwriters into taking Facebook public at a more reasonable price, giving buyers next year more compelling entry levels.
Then again, April, May, or June of next year is a long way out. Time has only made Facebook more popular and valuable. If the social networking site's momentum continues, who knows if even $100 billion may be too low. There's no point in settling for the silver medal of dot-com market capitalizations when there's gold at stake.
Longtime Motley Fool contributor Rick Munarriz does not own shares in any stocks in this article. The Motley Fool owns shares of Google and Yahoo!. Motley Fool newsletter services have recommended buying shares of Yahoo! and Google.