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Facebook May Have To State Financials – Or Go Public

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Facebook is near the SEC’s 500-private shareholder threshold and may have to publicly state financials by 2012

Few people outside the inner core of the Facebook leadership really know much about the income, profits and cash flow of the world’s largest and most successful social network, but that will soon change.

The Wall Street Journal reported that Facebook will be required by federal securities law to publicly disclose its internal financial information – or schedule an initial public offering (IPO) by April, 2012 – because it expects to cross the 500-private shareholder legal limit at some point this year.

More Than Rumours Circulating

Mark Zuckerberg

The newspaper reported that a private-placement memorandum is being distributed to potential investors in the social networking company. A Facebook press representative declined to comment in response to a query by eWEEK.

CEO and co-founder Mark Zuckerberg has made it clear numerous times that he is not interested in taking Facebook public, but he may have to rethink that position. He has also turned down a handful of offers to sell the company in the last three years.

The US Security & Exchange Commission’s 500-shareholder disclosure regulation requires companies to begin publicly disseminating financial information 120 days after the end of their fiscal year, which falls at the end of the calendar year in December, 2011, for Facebook. This makes April, 2012, the first month in which the company would have to start disclosing its financials.

The success of Facebook has spawned a growing interest for investing in social networking sites. The business-oriented LinkedIn company is reportedly cashing in on this by considering a stock offering within the first quarter of 2011.

Facebook, which is closing in on 600 million registered members, has been building corporate value steadily since its launch by Zuckerberg in 2004. Two years ago, the company attracted an initial $200 million (£129 million) investment from Russia’s Digital Sky Technologies, which recently increased that to a total stake of about $500 million (£324 million).

Wall Street investment firm Goldman Sachs reportedly has invested $450 million (£291 million) into Facebook, according to the New York Times. The combination of all of its private investments has unofficially valued the company at about $50 billion (£32 billion), easily ranking it as one of the most valuable companies in the world.