Facebook is generating profits at a faster than expected rate, and is likely attract so many investors this year that it will have to disclose financial data similar to a publicly traded company by April 2012, according to a document distributed by Goldman Sachs.
The move could set the stage for a much-anticipated Facebook initial public offering in 2012, though there is no guarantee that the social networking company would choose to sell shares to the public simply because it is required to open its books to the public.
Facebook, the world's number one internet social network, earned $355m in net income in the first nine months of 2010 on revenue of $1.2 billion, according to a source who received the documents that Goldman Sachs provided to its clients yesterday.
Goldman began hand-delivering copies of the 101-page private placement memorandum for a $1.5 billion Facebook offering to its wealthy customers a little after lunchtime yesterday in New York, according to the source.
The Goldman customer said he received a separate six-page financial statement containing information on the social networking company.
The document provides some of the most detailed financial information yet about Facebook, which Goldman recently valued at $50 billion in a separate, $450m funding.
That valuation is high, but not outrageous based on the glimpse into the company's financial performance and the growth that it implies, analysts said.
The memo said Facebook is likely to have more than 500 shareholders this year, according to another person who reviewed the documents, and that the company may begin filing public reports of its financial performance by April 2012.
US securities regulations require companies with more than 499 shareholders to disclose financial information. Facebook, which was founded in a Harvard dorm room in 2004, has over 500 million users and is challenging big Web businesses like Google and Yahoo for users' time online and for advertising dollars.
The financial statements circulated yesterday were not audited and offered little detail about how Facebook generates it revenue, said the Goldman customer, who did not want to be identified because he had signed a non-disclosure agreement.
Investors are increasingly eager to buy shares of Facebook and other fast-growing Internet social networking companies on private exchanges.
