Some of the world's biggest social networks are gearing up to go public, according to news reports this week.
A report in The Wall Street Journal has suggested Facebook will begin to publicly disclose its financial information or sell stock in an initial public offering by April 2012, based on memos distributed by investment firm Goldman Sachs to potential investors.
In late September, reports began to hit the blogosphere that Facebook was a few years away from its own IPO.
Facebook board member, venture capitalist and PayPal co-founder Peter Thiel told Reuters at the time that the company was looking at making an IPO sometime after late 2012. With more than half a billion users and a massive online presence, Facebook would likely draw a lot of investor interest.
Facebook, a privately held company, will reach a 500-shareholder limit this year, after which it must begin publicly disclosing financial information under U.S. Securities and Exchange Commission rules, the investor memo said. The memo, leaked by an unidentified investor, follows reports that Goldman Sachs had invested $US450 million while Russian firm Digital Sky Technologies had invested $50 million in the social network. The Goldman Sachs investment alone values the company at around $US50 billion.
That significant investment validated the business behind social networking, which was considered to be little more than an immature venture without a lot of planning behind it until the last few years.
However, LinkedIn may beat Mark Zuckerberg's social empire to the punch, with another report from The Wall Street Journal indicating the social network will file papers in the first quarter of this year in pursuit of an IPO. The offering will reportedly be underwritten by the Bank of America, Merrill Lynch, J.P. Morgan Chase & Co. and Morgan Stanley, according to unnamed sources.
Should it go ahead this year, LinkedIn will surpass both Facebook and Twitter, with all three garnering significant investment and private support over recent months.
"LinkedIn would be the first social networking company to go public and it will be a good test of how valuable these companies might be," said Dan Olds, an analyst with The Gabriel Consulting Group. "While LinkedIn isn't Facebook or Twitter, they do have something like 85 million users and a business plan that is at least as developed, or hazy, depending on your perspective, as those at Facebook and Twitter."
The SEC has initiated an inquiry into private share trading at Facebook and three other tech companies, other news reports suggest.
With reporting from Sharon Gaudin and Grant Gross.
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