Do Young Entrepreneurs Want to Take Their Company Public? (ahem… facebook)

Friday, April 27, 2007 at 01:26pm by David Askaripour in Communities

A few years ago, when I was just starting to get into entrepreneurship and also the stock market, one of my biggest dreams was to, one day, take a company that I created public. You know, issue an IPO (initial public offering) on the NASDAQ or the NYSE.

For those of you unfamiliar with taking a company public, here’s the quick rundown: Say you own a candy company and you are doing very well, but you’d like to expand into new territories. Well, you need more money to do that, right? So, what you would do is contact an investment banking firm, the firm would assess how much of the company you should sell to the public and then decide on an appropriate price per share, then through a series of other investment banking firms, brokerage houses, (called, the syndicate), your shares would be released onto the open market for anyone interested in owning a piece of your company. You would then, if all goes well, have the necessary money that you needed to expand your operations and the public would now own a certain amount of your company.

Of course it’s much more detailed than that, but the basic concept is giving up a chunk of your company to raise a large sum of cash to reinvest back into your business. In street terms, it’s called “floating” your company onto the market, and the “float” is the amount of shares you dump onto the market for the public to snap up.

Nowadays, I’m not so interesting in brining a company public one day, especially with the pitfalls that this country is facing with the Sarbanes Oxley Act, which is extremely prohibitive when it comes to going public.

But the concept of going public got me thinking about one particular young entrepreneur. Mark Zuckerberg of facebook. Now here’s an entrepreneur who turns down a 1 billion dollar offer to sell his beloved facebook. I admire him for his balls (wait, that didn’t come out right). Let’s try it again: I admire his boldness and courage to turn down such a huge offer.

My hunch tells me that he’s holding out for something bigger. Some sort of investment vehicle that will make him more than a billionaire one day. A source that knows Mark once told me that “Mark declined the deal because he wants to become a billionaire from the deal and the 1 billion offer wouldn’t be enough to make him one.”

So, want to know what I think? I think that Mark is holding out to go public. I think that facebook is gearing up to offer in IPO within the next 18-24 months. And, I think that it makes sense.

The IPO would give the army of students who truly love facebook the chance to own a piece of it and to financially share in the growth of the company. And, of course, facebook would make billions in the process. Money that can be used to make facebook a much better service for everyone. Not a bad deal.

With all the buzz and media continuing to shine light on facebook, I think it’s fair to say that there will be a certain level of Irrational Exuberance around the purchasing of the stock. In other words, many investors will blindly dump tons of cash into the stock without studying the fundamentals because it’s “cool!!!”

Sound familiar, ahm… tech bubble stock crash. Not to say there’s another bubble forming, but let’s just say that if there is… it may be facebook’s IPO (froth), that starts generating some bubble action.

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