Facebook IPO Delay… Zuckerberg Gambles Productivity Against Time

Our biggest argument is that Facebook is already public.  It has many shareholders, it is valued in the billions, and shares have traded on the public-private exchanges like Second Market.  The FT has reported that CEO Mark Zuckerberg wants to make sure that employees stay focused on developing products rather than being so focused on a big pay day.  There is also the notion that Facebook doesn’t really need capital today.

What the FT did not really address was that Facebook is making a big gamble here.  Right now, market conditions are not good for an IPO.  The market is also smartening up to the idea that a low-float IPO is really more of an artificial market rather than a true market.  What if Facebook’s competition manages to heat up?  What if a recession truly comes back?  What if the market gets worse?  And most importantly, what if Facebook actually starts to peak?

Whether you value Facebook at $60 billion, $80 billion, or even $100 billion, there is a real issue to consider… There are just not too many companies worth more than $100 billion.  How high will Facebook’s revenues have to reach to support such a valuation?  We have heard various revenue figures, some at $2 billion or so in 2010 revenues and some at more than $3 billion or even $4 billion expected this year.  Doubling sales over and over runs into the law of large numbers at some point.

If Mark Zuckerberg wants Facebook to come public, he might as well just get the filing out of the way.  It is still going to take months to come public after the first S-1 filing and we think that Facebook will have to start reporting some public data next year anyhow since it has more than the 500 shareholder mark.  If the company wants to hold off to milk more out of the employees, it better hope things remain as good for the company as they have.

We have a serious question and something worth consideration… What percentage of those highly active Facebook users are kids, permanently unemployed, and at-home parents?  If that number is too great, some of this great “time spent on site” may be very misleading.

JON C. OGG