Written by:
Shali Zhu

An IPO for Facebook?

Although social networking sites such as Facebook, MySpace, and LinkedIn connect millions in the general public, all of these companies have remained privately owned. As perhaps the most widely recognized social networking company with over 400 million users, Facebook – and its founder Mark Zuckerberg – has been deflecting more and more questions about the possibility of an initial public offering, an event which some in the investment world hope would help rejuvenate the struggling Silicon Valley IPO market.

Not so fast, says Zuckerberg. In a recent interview with the Wall Street Journal, the CEO emphasized that Facebook is in “no rush” to create an IPO, even though going public is a provision in the contract that the social networking company holds with its investors and employees. So far, Zuckerberg has tried to circumvent the question of public ownership by establishing a dual-class voting structure and by allowing his employees to redeem the value on some of their Facebook stock last year.

Many in Silicon Valley and on Wall Street are curious why Mark Zuckerberg has continued to delay taking Facebook public, since, according to a Wall Street Journal article published this March, the chief executive owns more than 25 percent of the social networking company’s stock. An initial public offering for the company that he founded would earn him billions of dollars, making him the wealthiest twenty-something in the world. However, this would not be the first time that the CEO has chosen to temporarily forgo an opportunity to greatly augment his financial well-being. When Yahoo approached with a proposal to buy the company for $1 billion in 2006, for instance, Zuckerberg refused the offer. In addition, he passed up a potential $8 billion plus deal to sell his company to Microsoft.

So what would a hypothetical Facebook IPO be worth? According to Lou Kerner, who has worked as an Internet analyst at Merrill Lynch and Goldman Sachs, Facebook could be worth $59 billion by next year and nearly twice as much by 2015, a market capitalization that would far exceed the $27 billion closing market cap that marked Google’s first day of public trading. Some investors are not waiting for an official announcement from Facebook to begin trading the company’s stock. An article by the Wall Street Journal reports that private market exchanges such as SecondMarket and SharesPost have already seen stocks of the company being bought and sold for more than $30 per share.

To read more about the potential IPO in Facebook’s future, click here. Photo courtesy of Flickr.