UPDATED 12:10 EST / FEBRUARY 01 2012

Facebook IPO: Hurdles, Monetization Demands

Any minute now, Facebook is expected to file paperwork for a $5 billion initial public offering.  And according to SiliconANGLE’s founder John Furrier, Morgan Stanley was chosen as the lead underwriter, coveting the  “left lead position” title with four others, Goldman Sacks, Bank of America Merrill Lynch, Barclays, and JP Morgan, also taking part. Goldman Sachs is said to playing the role of S1 who “will fire the starting gun on an IPO that caps a string of flotations of the latest breed of internet companies reshaping the world.”

According to an article in The Wall Street Journal, Mark Zuckerberg has been reluctant in pushing forward with the company’s IPO as he is fearful of the damage that an IPO could bring to their company.  Zuckerberg wants his employees to be focused on making great products and not the stock price.

But when executives realized that Facebook would have more than 500 shareholders by the end of 201, they figured it would be more practical and sensible for Facebook to go public than stay private but publicly release financial information because of regulatory requirements.

Hurdles

Going public renders Facebook vulnerable to lawsuits as seen last year when it was named defendant in 22 lawsuits accusing it of patent infringement.

Probably the most significant lawsuit is the one filed by a former Kirkland & Ellis partner, who’s since left the prominent firm to start his own.  Facebook allegedly violated a patent that covers the core ability to transmit messages to large networks of users.

Aside from the legal hurdles, Zuckerberg has to deal with being scrutinized by analysts every three months or so, eyeing how his company is doing, and giving him unsolicited advice.  He is not known for being a conformist, and going public isn’t likely to change that.

Monetization Machine

Though some were doubtful, Furrier was firm on his stance that Facebook is a monetization machine.  And this was recently proved when Facebook’s ad revenue greatly surpassed Yahoo! in display ad revenue.

But it’s not only in display ads that Facebook generates cash.  You can’t forget Zynga and other companies that deliver games which players willingly spend actual money on.  Yes, Facebook is platform that connects people but it is also a platform that generates cash, and loads of it.  So IPO or not, Facebook won’t be losing money anytime soon.


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