Comment by JoshTriplett | Hacker News Reader

Comment by JoshTriplett | Hacker News Reader

Parent Full thread

Edit: Thanks to the responses that pointed out that the 500 private investor limit did not force the IPO, just a pile of disclosure requirements and other restrictions; apparently some of the news sources I'd originally read had not quite grasped that point either. The main point still stands, though: Facebook had a larger-than-normal set of private investors and brokers that did quite a bit of trading at IPO-time.

Facebook had a relatively large number of private investors, enough to trigger additional restrictions regarding reporting and disclosure. Facebook hadn't intended to exceed that limit, but hit it anyway due in large part to new restrictions that prevented intermediaries such as brokers from letting many downstream customers count as 1, as well as people reselling their shares on secondary markets to extract value from them.

Those same private investors and brokers did quite a bit of trading when the IPO happened, much of it not to the benefit of Facebook.

Facebook was not required to go public.

I've posted this many times, including http://news.ycombinator.com/item?id=3753915

They were required to make disclosures but no one forced them to go public. Plenty of companies have more than 500 shareholders yet still opt to remain private.

> Companies with more than $10 million in assets whose securities are held by more than 500 owners must file annual and other periodic reports. These reports are available to the public through the SEC's EDGAR database.

Please stop shouting.

Please accept my apology for shouting.

Many threads regarding the Facebook IPO are littered with people repeating the same idea that Facebook was forced to go public, based on a faulty understanding of SEC regulations. And no one, especially late stage YC companies, should feel pressured to IPO.

Thanks for the correction. Various news sources have made the same mistake, and I must have picked it up from one of those.

A company forced to file these reports essentially has all the costs of being a public company. There's absolutely no reason not to go public at this point, to benefit existing shareholders. The average op-ed writer is ignorant about finance but this is what is meant when informed people talk about companies being forced to go public--they're forced to take on all the costs of being public, so might as well just IPO.

They are forced to take some of the economic costs of being public, but the managers have much more flexibility when the company is private. For example, Facebook's acquisition of Instagram would not fly if FB were public when that happened.

You can argue that the paperwork is onerous, but its paperwork. The headaches involved with public companies go far beyond a few paltry reports.

> ... the managers have much more flexibility when the company is private. For example, Facebook's acquisition of Instagram would not fly if FB were public when that happened.

Is that really the case? In other words, what additional restrictions does a publicly-listed company have that privately-traded companies do not have?

Your comment seems plausible, but I could imagine that the SEC regulations around > 500 shareholders etc. could also include all the shareholder protections we associate with public companies, as well.

Additionally, I wouldn't be surprised if Mark Zuckerberg's controlling interest in FB had some sort of an impact on what regulations apply to the company.

Presumably there are some advantages to remaining private since there are plenty of large US corporations which choose to do so:

http://www.forbes.com/private

I couldn't find any reliable sources for what the advantages were though.

Not at Facebook. Zuck still owns a majority of the voting shares. The board has almost no teeth an couldn't have stopped the Instagram transaction if it wanted too.

Reply on news.ycombinator.com