HOW FACEBOOK WILL CHANGE WHEN IT GOES PUBLIC SOON

Posted on December 30, 2010 by Jeffrey Newman

The pressure is now on FACEBOOK to make the move and go public, in part due to special rules of the Security Exchange Commission relating to the amount of private stock issued in a company and the securities issues that arise when private companies are so large that informal trading already occurs. The SEC is examining FACEBOOK for these problems now as FACEBOOK has passed the 500 million viewership mark and trading by hedge funds and others is occurring already. FACEBOOK’s CEO has said the company will be taken public, the question is when. Signs are, it will happen soon. Meetings are more formal and businesslike and information flow to the outside more restricted. Once the company does go public, is must not only deal with SEC scrutiny but also the eyes of its own shareholders who will not be reluctant to file class action shareholder lawsuits when company actions depress their stock price. In addition, there will be heavy scrutiny by the Federal Trade Commission for privacy related matters, scrutiny by Homeland Security for patterns of information flow which may derive from terrorists within and outside the nation and the company filings which must include any changes or lawsuits concerning the company which could have a material impact on the company financial position. These filings must include an annual report with detailed data on income, costs, salaries including benefits of managers and much much more. Essentially, the face of FACEBOOK will evolve as it will come under massive scrutiny by, among others, investor analysts who will ask probing questions at telephonic meetings and meetings of shareholders after these analysts have spent hours pouring over the data. In addition, any acquisition targets  will require review and approval by the DOJ for issues of anti-trust. Also, the company will have to deal with the various interested investors with representatives on the board of directors as well as outside companies seeking to gain position within the company through massive purchases of common stock. How all of this will affect FACEBOOK is not yet clear as it is the first major company of its kind in the social media space to be taken public on this scale. The balance, will be to satisfy the legal and business needs of a public company while still remaining innovative and attractive new segments of viewers to retain the company growth needs.  It is likely that the company will become less autocratic by force of becoming public and fall within the control and decision making of a group for day to day operations. What a fascinating study for web historians, business analysts, sociologists and lawyers.