ALTHOUGH company executives have repeatedly tried to dampen speculation about an impending IPO, Facebook looks increasingly ready to go public in the coming year – an event that could be a big boost to shattered public interest and confidence in the US stock market.
Bloomberg reports that three sources have told the newswire that Facebook is on track to hit $2 billion in sales this year. Consider that when Google went public six years ago, it was coming off a prior year’s revenues of just $1.5 billion.
In September, Facebook board member, venture capitalist and PayPal co-founder Peter Thiel told Reuters: “It probably will IPO at some point. The lesson from Google seems to be that you don’t go public until very late.”
Thiel said he did not think an IPO would happen until after late 2012, but it would depend on the company hitting certain revenue targets and how its business model develops.
However, in a Dec. 5 interview with Leslie Stahl on 60 Minutes, Facebook CEO Mark Zuckerberg, who Time Magazine yesterday named as its 2010 Person of the Year, made it clear that he favors taking the company public.
Asked if he fears giving up control if the company goes public, he answered: “A lot of people who… build startups or companies think that selling the company or going public is this end point. You win when you go public. That’s just not how I see it. “
Strong appetite for new Internet stocks
Meanwhile, recent IPO activity shows that there’s a strong appetite among US investors for social networking and Internet stocks. Last week, for instance, China’s biggest video site Youku.com Inc. surged in the biggest gain for a US IPO in 5 years, while book retailer E- Commerce China Dangdang Inc. almost doubled after its $272 million initial sale.
Meanwhile, Reuters reports that several Chinese social networking companies or “Facebook clones” are eying the US IPO markets. It said that Oak Pacific Interactive, which owns Facebook-like social network Renren, has hired Credit Suisse Group AG and Deutsche Bank AG to underwrite its IPO in the first half of next year. Renren has 100 million users.
Other firms lining up include TaoMee, a social networking site for children, and Kaixin001, a social networking site, which are both profitable.
Ironically, while the country’s companies are seeking capital from US investors, Chinese authorities have blocked their citizens from using Facebook.
A catalyst for rekindled stock investing
A stock market debut by Facebook, which has 550 million worldwide users and is adding 700, 000 new accounts per day, would value the company in the tens of billions of dollars and be the equivalent of household name like Disney or Coca-Cola going public for the first time. The stock would have widespread public appeal, from grandparents to teens.
It’s just the sort of shot in the arm the capital markets need to reinvigorate Main Street interest in stocks again after a series of betrayals of trust starting with Enron and ending with the most recent financial crisis and recession.
In fact, it would be cool to see the entire IPO done on Facebook itself, rather than through the Wall Street banks and their institutional investor cronies.
The more people who participate in a market, the more vibrant and successful it is. That’s good for all public companies, especially new ventures seeking capital to grow.
And a strong and growing business community is ultimately a good thing for the IR profession and the industry vendors that serve it.
That’s why we should all hope for a Facebook IPO in 2011.