Blog Post

SEC Won’t Enforce Rule That Would Make Facebook Finances Public

Facebook isn’t a public company and it isn’t going to have to act like one any time soon. According to BusinessWeek, the SEC agreed that it won’t enforce a rule that would require public disclosure of financial results when the number of equity holders hits 500 and the assets total more than $10 million because the only class likely to be affected covers employee equity granted through restricted stock units (RSUs). The RSUs won’t be issued unless the company changes hands or launches an IPO. The SEC’s promise of no action — the equivalent of an exemption — was issued last month following a letter from Facebook law firm Fenwick & West in anticipation that Facebook could hit the 500 mark for employees with equity. The exemption wouldn’t cover the company’s common stock or preferred stock for Series A, B, & D, which involve investors or a mix of employees and investors.

If this sounds familiar, Google’s decision to go public in 2004 was attributed to this SEC requirement. As Keith Higgins, an attorney not connected with Facebook, told BW: “This really obviates the pressure that Google (NSDQ: GOOG) might have felt.” It also provides Facebook the flexibility to keep using equity as a lure for new employees.