Is Facebook Missing an Opportunity by Saying No to an IPO?
Facebook, the Palo Alto, Calif.-based social network, has no plans to go public until at least 2012, Bloomberg reports after talking to unnamed sources close to the company. The company apparently wants another year of growth before going public. Initially, Facebook was rumored to be going public in 2010, and then in 2011. The draconian procedures and bureaucratic migraines that come with going public notwithstanding, one big question comes to mind: Is Mark Zuckerberg missing an opportunity by not going public now?
“If they have other sources of capital, the company would probably be better off deferring an IPO until Zuckerberg had more experience under his belt,” said Ray Valdes, a San Jose, California-based analyst at Gartner Inc.
Poppycock! I don’t buy these nonsensical arguments that Mark needs more experience — he is the only 26-year-old I know of who’s put a company worth $ 158 billion on the defensive.
Logically speaking, it makes perfect sense for the company to wait it out. Facebook has revenues that are growing at a massive clip — rumored to be around $ 1.4 billion in 2010, and that can only go higher. A few more years of that kind of growth and you are looking at a company that may make a bigger splash in the public markets.
On the flip side, things can go wrong. In the fast-changing world of social networks and fickle online consumers, the tide shifts more rapidly than you think. In the last ten years, we’ve seen seemingly unshakeable major Internet brands — eBay and Yahoo — stumble and struggle. The future of a search monopolist (Google if you want to know) is being questioned in business media. Hey remember — five years ago there was nobody better than MySpace. Who knows what lurks around the proverbial corner. What if the seemingly unstoppable growth flattens out in late 2011? Can the company go public then?
More importantly, the stock market is like a Mexican telenovela on speed — responding to sentiment and not so much to logic. At the moment, it seems Wall Street will pay top dollar for Facebook.
“Who is advising Facebook to wait for another [year] of growth? Wall Street wants to fund that growth and get in!” Jim Cramer, founder of TheStreet.com, host of truly crazy Mad Money and a reformed hedge fund manager tweeted when I asked him what he thought about Facebook’s IPO (or lack there off.) “Market craves growth,” he added. With few growth options, he felt that it was time for Facebook to strike and use public money to fund its growth. “I believe that this market is so desperate for growth that it might have paid $ 70-80 billion for Facebook.” At present, Facebook is valued at close to $ 25 billion on SharesPost, a private exchange which allows company insiders to sell their holdings to investors in private transactions.
An IPO like that could have other repercussions — it could lift the slumbering fortunes of Silicon Valley, which is waiting for the initial public offering market to party like it’s 1999. There are a lot of significantly large companies that are stuck in neutral because public markets, for now, are waiting for a powerful signal — like a Facebook IPO.
What do you guys think? Is Facebook smart to wait it out, or do you agree with Cramer — strike when the iron is hot?
Related Post from the Archives: By the Numbers: Facebook’s Road to an IPO
Related content from GigaOM Pro (sub req’d): Why Google Should Fear the Social Web
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