/// Even If It Had 500 Shareholders Today, Facebook Doesn’t Have to Disclose Financials Until Spring of 2012 [BoomTown]

January 6, 2011  |  All Things Digital


For all those in a tizzy–including BoomTown–about Facebook’s deal with Goldman Sachs, which some think is designed to circumvent securities rules related to shareholder numbers and financial disclosure, meet Section 12(g)(1) of the Securities Exchange Act of 1934. Because if anyone cared to read the actual text of the law in question (as I did, after it was pointed out to me), even if it was determined that Facebook had 500 shareholders at this very moment, it is technically not required to disclose any of its financial details until May of 2012. As in next spring, after it probably would have filed for a public offering anyway. As far as government literature goes, 12(g)(1) is pretty clear, noting that any company of Facebook’s size, after it reaches 500 shareholders, must make financial and other disclosures “within one hundred and twenty days after the last day of its…fiscal year.” For Facebook, its current fiscal year ends December 31, 2011, making its disclosure deadline April 29, 2012. As the New York Times noted today : “Section 12 (g) of the Securities Exchange Act of 1934 came about in the 1960s as over-the-counter trading in shares of privately held companies began to heat up and regulators worried that investors were not getting enough information.” The huge amount of time Facebook has to adhere to the private company disclosure law has not been noted in copious coverage of the deal, in which Goldman Sachs clients would be able to invest up to $1.5 billion in the Silicon Valley company, as part of a single entity “special purpose vehicle.” But it brings into focus–given its long lead time–whether Facebook would go to such lengths to keep it shareholder size small at this point. Nonetheless, from a perceptual viewpoint, the Goldman investment has brought unneeded scrutiny to Facebook, from both the public and also government regulators. It has also painted the company–which has an everyman, mainstream image, in general–as elitist and consorting with rich Wall Street bankers. In any case, with the Goldman deal, a lot of financial information about Facebook is now seeping out anyway, as part of the investment bank’s offering documents to clients it is presenting the Facebook opportunity to

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Even If It Had 500 Shareholders Today, Facebook Doesn’t Have to Disclose Financials Until Spring of 2012 [BoomTown]


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