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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 (s EBAY) and Yahoo (s YHOO) — stumble and struggle. The future of a search monopolist (Google (s GOOG) 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, 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

19 Responses to “Is Facebook Missing an Opportunity by Saying No to an IPO?”

  1. Well if the anger Zynga they are history and they both need each other like eBay and PayPal did. I would sell out now but that’s me. IPOs are good for making people instantly rich and common shareholders a little richer if timed right. Facebook has growth left but $80 billion for $2 billion in revenue? Hah, never. Facebook will be your grandma’s social network in 5 years.

  2. I would not invest 1 penny on facebook if it goes public. This company has matured already and is ready to fall. Its just like myspace and look at the ranking of myspace now. I think facebook is worst than myspace and i personally dont even go there. Its the most boring social network site i ever seen. If you invest in facebook…good luck in throwing all your money away. Once it goes public, its a fall from there.

  3. Going public is overrated. Once you do it, you’re no longer permitted to grow in a rational way, or plateau, if that’s what makes the most sense for your business. I would not want to take a company I started public.

    • Well, you do have a valid point, but if no company went public, the world economy would collapse. Also, Jeff, you’re forgetting an advantage that founders have when they take their company public: they usually get a very large sum of cash that they get to keep regardless of how their company performs after an IPO.

      • Oh God. The World would collapse If no company went public? Clearly you have no idea what stock markets can and can’t do. All they do is give companies money to grow (which they can get elswhere without all the negatives associated with being public) which is good for an economy as a whole or give the founders to cash in (which is good for the founder(s) but not directly theneconomy).

        If I had the choice I would never go public!

  4. Om, you are absolutely right about there being great risk going forward for the company. It does seem that they are so tied into the fabric of the web and have so much personal content about us that for the next few years at least they should be able to grow safely. Like you implied above, the challenge is they have multibillion dollar companies gunning for them.

  5. Interesting – but the underlying suggestion is that the company should go public now and place the risk in the hands of the public, rather than dot the “i”s and cross the “t”s first. An IPO isn’t about the day of the deal, ideally it’s about the years (and the stock performance) that follow. While there are always risks in an unknown future, hats off to any company that views the transaction from a long term perspective, as Facebook appears to be doing here.

  6. 2 years could be a long in the social networks era. Depends on what Zuckerberg’s got under his sleeves. If things bring in a drastic change to the face of social network and when FB misses being in the boat, it will be a bad thing

  7. Phew, talk about missing the boat. Is it me or does anyone else wonder either how much more growth they can manage or if its about muzzling zuckerberg long enough to improve brand perception. Either way they’re a risky IPO in any case. No thanks.

  8. I wouldn’t claim to know more about these topics than you or Cramer, but I like giving it another year to germinate – granted that year will likely see profound changes in these platforms. While we all live and breathe it, this category is still an infant. Who will win is like trying to predict who will win the World Series from the first pitch on opening day. (A baseball analogy just for you, Om.)