SEC Won’t Enforce Rule That Would Make Facebook Finances Public

By
Staci D. Kramer
- Sun 23 Nov 2008 11:19 PM PST

Facebook isn’t a public company and it isn’t going to have to act like one any time soon. According to BusinessWeek,
the SEC agreed that it won’t enforce a rule that would require public
disclosure of financial results when the number of equity holders hits
500 and the assets total more than $10 million because the only class
likely to be affected covers employee equity granted through restricted
stock units (RSUs). The RSUs won’t be issued unless the company changes
hands or launches an IPO. The SEC’s promise of no action—the equivalent
of an exemption—was issued last month following a letter
from Facebook law firm Fenwick & West in anticipation that Facebook
could hit the 500 mark for employees with equity. The exemption
wouldn’t cover the company’s common stock or preferred stock for Series
A, B, & D, which involve investors or a mix of employees and
investors.

If this sounds familiar, Google’s decision to go public in 2004 was
attributed to this SEC requirement. As Keith Higgins, an attorney not
connected with Facebook, told BW: “This really obviates the pressure
that Google (NSDQ: GOOG) might have felt.” It also provides Facebook the flexibility to keep using equity as a lure for new employees.