When Russia’s largest internet group, Mail.ru, announced investors would have an opportunity to take an indirect stake in the social networking site, it begged the following question:
Does Facebook really need to go public?
Ten years ago, my answer may have been different. But for the time being, Facebook does not need to go public, and here's why.
One of the many reasons to go public is to create liquidity. Unlike a decade ago, there is a liquid secondary market where employees or early investors can cash out if that is their intention. If this was thought to be a reason why those inherently invested in Facebook would want to go public, it is not of the necessity by these terms.
Another question I have: Is Facebook even ready for such a public splash? They need to have a more visible revenue growth strategy in place before an IPO. What are the plans for advertising? How about for eventual subscription plans?
When Aryeh Bourkoff, UBS Vice Chairman of Telecom, Media & Technology Investment Banking, called in to the show yesterday, he echoed my sentiment. The only reason why Facebook would want to be publicly traded, he added, is if they want to effort other transactions.
First off, if they wanted to go this route, they could likely fund an acquisition with very attractive cheap debt now.
But, I have an inkling that Facebook CEO Mark Zuckerbergis not interested in these ventures at the moment. This could easily change should Facebook look to become the next Google, but for now, patterns indicate that Facebook may be looking to expand their business primarily through their current operations.
And if this should be the case, the stock could stay private as liquidity in the secondary market grows
Programming note: "
Gary Kaminsky does not hold any equity positions.
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