The Financial Times is reporting that Facebook doesn't plan to go public until late 2012. This apparently is surprising, given the amount of times the story has appeared in my Twitter feed. But it shouldn't be.
First, let's be clear: Facebook hasn't actually "delayed" anything. It never registered for an IPO, let alone prepped a roadshow or a formal offering date. Instead, there was widespread speculation that the social network would go public early next year -- or late this year -- because that's the time when it's expected to bump up against the so-called 500-shareholder rule.
For the uninitiated, that rule subjects any private company with 500 or more shareholders to reporting requirements that are similar to those of public companies. So similar, in fact, that most companies in this position simply go public. Think Google (GOOG) back in 2004.
But there isn't actually any requirement that companies do so. Facebook has the option to remain private indefinitely, allowing existing shareholders to generate liquidity via the private secondary markets.
Why would it do so? Well, because public reporting isn't the only downside of going public. Public companies also have to worry more about short-term earnings than do private companies, and management is required to kiss the butts of hedge fund managers and analysts. Can you seriously see Mark Zuckerberg doing that? Or at least doing it well?
Moreover, there is a decent chance that Congress and/or the SEC will have decimated the 500-shareholder rule by this time next year. If such efforts are successful, Facebook wouldn't even have the public reporting requirements. At that point, the only remaining reason to go public is capital-raising, but it's unclear that Facebook would really need the money. It's profitable, and easily could raise private equity if the need arose.
To be clear, I'm not saying Facebook will never go public. Just that it doesn't need to. Not in late 2012. Not ever.
