Facebook Stock Going Public?

zmaragdus writes "Facebook Inc. converted its existing stock holdings into different classes of stocks (Class A and Class B) designed to give certain shareholders more power than others. This has been typically done in an IPO of a company's stock to give important people (company founders, for instance) more clout in the actions of the company when stock is first offered to the public. While Facebook maintains that it does not plan to offer stock publicly in the near future, this restructuring is one of the critical steps in doing so."

Comments

Now for some vitamin W

[Anonymous Coward]

For WHO GIVES A FUCK!

*sighs*

Of course it's going public

[Nursie]

It's at the peak of it's popularity and thus the peak of it's perceived value.

They'll "go public", the owners (founders and other investors) will make out like bandits and then retards^H^H^H^H^H^H^Hfund managers will invest money in it from all of our pensions and savings. The stock will change hands many times as it is speculated upon repeatedly until such time as the next big thing comes along and it takes a slow plunge to worthlessness and irrelevancy.

In the meantime the founders are rolling in (our) cash.

Re:Of course it's going public

[FooAtWFU]

So (quit the 401(k) and roll it over into an IRA and) take responsibility for your own savings. Heck, short-sell if you want. Just remember that the market can remain irrational longer than you can necessarily remain solvent.

Re:Of course it's going public

[CarlDenny]

And pets.com, and webvan, ...

Re:Of course it's going public

[Darkness404]

I guarantee you that by the time the average 20-30 year old /.er reaches retirement age, Google, MS, Apple and most other "hot" companies will have either gone worthless, bankrupt, or otherwise not a good stock to have. Yeah, buying Google, MS and Apple when they went public made lots of people really rich really fast. But they are crap retirement stocks when compared to steadily rising stocks.

Re:Of course it's going public

[zippthorne]

And so we see the real point of IRAs and 401ks. To lock up your money in vehicles where other people can make it work for them.

Thank you, but "won't be taxed until later, when taxes' inexorable rise negates the supposed benefit of the lower income" is just not as enticing as it used to be.

IRAs are like cell phone contracts. You think you're getting a deal, but all you're really getting is less bargaining power.

Re:Of course it's going public

[mysidia]

It's possible to sell short in an IRA, but it's difficult / expensive to get an arrangement that will allow you to. Buying PUT options might be a better choice for betting against a stock, for a trader, provided you understand the mathematics, the risks, and requirements involved (including such risks as your broker automatically exercising an option at expiration if you fail to deliver notice to leave it un-exercised, or they fail to receive your order in time).

Generally, most brokers won't just let you as an individual open a margin account using a new IRA with them as custodian. You will probably need what's referred to as a self-directed IRA through a custodian you have paid to allow you the option of a self-directed IRA.

You will need a custodian for the IRA who is willing to let you do it, and a broker that is willing to allow you to do it, and you open the margin account with a brokerage through that custodian.

The thing with margin accounts, is they allow you to borrow money, and generate debt-financed income.

This leads to two issues with regards to the tax and other rules effecting IRAs:

(a) The IRA is a separate entity, no assets outside that IRA can be used as collateral for the margin debt. So if you massively leverage your IRA account, and manage to get into serious debt... you walk away, the broker has no recourse against you. So the broker will not be interested in opening this margin account, except under strict rules, and if you have loads of cash to invest with them.

You can't sign any agreement that gives the broker recourse against you for your IRA's activities, or recourse/any use of your income/ assets outside the IRA.

Any use of resources outside the IRA, for IRA business is referred to as a prohibited transaction, the consequence is severe:

If the IRS finds out about any prohibited transaction, they'll disqualify the IRA for tax purposes: it gets treated as if you took a distribution of the entire value of the IRA at the beginning of the year the prohibited transaction occured, which incurs an early distribution penalty, and tax is now overdue on any income from the IRA.

So brokers and your custodian should be very cautious in this manner. Your broker stands to lose money, if the IRA (with potentially limited resources) gets into debt.

Also, there is this second item, about (b) Debt-financed income.

Your IRA itself has to pay UBIT (Unrelated Business Income Tax) on what is referred to as the UDFI (Unrelated debt-financed income), if it makes more than $1000 of such income, just like all other organizations exempted from tax under 501(a) and 529(a) (Form 990-T). IRS Publication 598

Your custodian has to file the 990-T and pay the tax, if it is due. If there is not enough cash in your account to cover the tax, then your custodian must liquidate other assets in it as needed to pay the tax.

Not a "critical" step

[mattack2]

The summary is wrong in calling this a "critical" step. It is a voluntary step, for the founders (and whoever else gets the higher class stock) to have more control over the company. But it's not mandatory (which I would infer by it being a "critical" step).

Re:hmm

[Psaakyrn]

Google also exists merely on advertising, so it isn't always true.

Re:hmm

[Culture20]

I don't. Once it's a public company, it has a fiduciary responsibility to bend its users over to try and get as much money for its shareholders as it can.

Re:Who needs facebook

[MichaelSmith]

I need facebook so my wife, sister, mother, etc don't inhabit /.

The other reason for doing this

[BlueBoxSW.com]

The other reason for doing this is if you plan on distributing profits based on shares.

You can give more money to some people while giving the illusion of ownership to all.

Re:It would be only fitting ;)

[icebraining]

When was Slashdot supposed to be a place to make friends? I come here for the news *cof*, old memes and car analogies.

Re:hmm

[AmigaMMC]

Screwing users over is great for short-term revenue, but companies who are in it for the long haul value things like brand loyalty.

In this universe things work differently. Take eBay: it had huge brand loyalty and it has been pushing and pushing and people have been abandoning by the thousands. eBay last March actually created (because of a bug according to them, yeah right) a hundred thousand fake listings right in the middle of a user boycott to show the numbers were actually up instead of down. Their stock has been plummeting. Companies with public stock have stopped caring about their users/consumers long time ago. Maybe in your universe things are different, I wish I lived there ;)

Re:hmm

[Anonymous Coward]

Name any IT company that has been at the top of its field for longer that 10-15 years....

Then sit down and ask why the stockmarket uses 8-10 multiples of earnings to value IT companies.... I can't answer this one.

Then sit down and ask why would you buy into the IPO as a long term investor. Give it 5 years and people won't remember it.

Re:hmm

[darthflo]

...ask them for a fee to see whom of their friends viewed their profile.

Facebook isn't a true dating site, it's more of an extension of your real life social circle. Remember that cute chick your friend Greg was with at that concert where you randomly met? You two exchanged a few words, and you're pretty sure she smiled at you in an "interested" sort of way, but you were too shy/drunk/whatever to ask her for/write down her number. Luckily Greg has her as a friend, so you add her too. After she's accepted your friend request (she will, there's at least one mutual friend & she might've already met you); you of course want to know if she just Accepted and was done with that or actually checked out your profile. And that party photos where you're totally drunk, half passed out and look wicked cool. Well, guess what: You can. For 20 credits (1000 credits are $9.99) you get 24 hours of access to your profile's visitor log. Another 20 credits will even tell you whom looked at which one of your photos and videos.
You spent 40 cents for quite a bit more information than you'd get before buying a girl a drink in a bar. In five out of six cases, she might never even visit your profile, but you'll be checking for that occasional one out of six who will. At 20 cts per day and a moderate guess of 100 checks per year, they make $20 off of you directly, $50 off of you for advertising and $30 for some data mining (they have your credit card, know what ads you click, what profiles you look at and they've got pics of everything you do). That's $100, annually for, say, 5% of their 300m user base. $1.5bn ain't that bad.

No, don't quit the 401(k).

[Estanislao Mart�nez]

401(k) plans may suck, but you're investing pre-tax, and your employer may be matching your contributions, in which case you'd be leaving money on the table by not participating. Over the long term, the investment return on the tax savings and an employer match are more important than the mediocre performance of your employer's sucky 401(k) plan. Here's better advice:

1. First priority is to contribute to the 401(k) plan up to your employer maximum match. Make sure that you pick the lowest-cost, most diversified investment choices offered in the plan (i.e., the ones that suck the least). Index funds are ideal, so if your 401(k) offers some, pick those up.
2. Once you've made the match, your second priority is to put further contributions into an IRA from a good provider. I'll insist that you go with Vanguard.
3. Once you've filled up the IRA, then if you have extra money to invest, put it into the 401(k), so you get more of the tax savings.
4. When you leave your employer, make sure to roll the 401(k) over to an IRA at a good company like Vanguard.
5. Learn about asset allocation and rebalancing, and practice them religiously.