Facebook is a “Private” Company

I feel like it’s time to take a step back and put the focus on the business side of Facebook. Here is what Facebook stated in its latest press release:

Founded in February 2004, Facebook’s mission is to give people the power to share and make the world more open and connected. Anyone can sign up for Facebook and interact with the people they know in a trusted environment. Facebook is a privately held company and is headquartered in Palo Alto, Calif.

Facebook is a private company. Not to be confused with the term private I have been throwing around for the last week. This term private is used to distinguish Facebook as a privately held company. This means that Facebook is defined as a company owned by a smaller number of shareholders or company members, and the ownership of these shares of Facebook stock are not publicly traded on stock markets. Shares of Facebook are only available privately, that is the only access you or I have to ownership is through a private exchange between ourselves and the company.

Why is this important? Because according to the very same press release, which you can read here, Facebook now expects to exceed 500 shareholders by April 31, 2012. And once Facebook does this, it will be required to file public financial reports by this time at the latest. Cool, now what? Once Facebook begins filing public financial reports, the logical and most financially rewarding step will be making Facebook a public company. While Facebook will not be bound to go public by any means, once they go through the steps of public reporting and the red tape associated, there is no reason why the company should not go public. And that means an IPO.

An IPO is an initial public offering. This will be the first chance for an ordinary person to participate in the selling, buying, or exchanging of Facebook shares on stock markets, rather than privately. The impact of an IPO is far-reaching, and I plan to examine that much more in depth, but for now what’s important: Experts are saying to expect a Facebook IPO by April of 2012. Once Facebook goes public, their financial reports will be released publicly, meaning all my musings about where Facebook makes money and what it does with it can be proved or disproved.

This is important, because at the end of the day, Facebook is making money off of its users activity on the network. This activity generates information. Your information.

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