A Facebook IPO in 2012 appears to be likely — unless the social-networking company begins publically disclosing financial data.
Goldman Sachs 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 Thursday in New York, according to a person who received a copy.
Facebook's intentions have been scrutinized by the Securities and Exchange Commission and investors since the company launched a private share offering through Goldman earlier this week.
According to Goldman's memorandum, Facebook earned $355 million in net income in the first nine months of 2010, according to documents distributed by Goldman Sachs, a fraction of the online social network's $50 billion valuation.
According to the document, Facebook generated $1.2 billion in revenue in the first nine months of 2010.
That valuation is high, but not outrageous based on the glimpse into the company's financial performance and the growth that it implies, said Ryan Jacob, of the Jacob Internet Fund.
"It just shows you that these business can generate 30 percent to 40 percent, potentially, operating margins," he said.
"They probably did at least $500 million in net income in 2010," Jacob said.
A Goldman customer who received the 101-page memorandum 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, $450 million funding.
"This year you could make the case that they're probably going to be north of $800 million and probably close to a billion," Jacob said.
A Facebook representative declined to comment on the report.
The financial statements were not audited and offered little detail about how Facebook generates it revenue, said the source, who did not want to be identified because he had signed a non-disclosure agreement.
Facebook, which was founded in a Harvard dorm room in 2004, has more than 500 million users and is challenging big Web businesses like Google Inc and Yahoo Inc for users' time online and for advertising dollars.
Goldman customers seeking to buy shares in the privately held Facebook will invest money in a newly formed Delaware entity called FBDC Investors LP, according to the source. Corporate records show that FBDC Investors was incorporated in Delaware on January 5.
Goldman customers have until Friday to commit to investing in the new entity and until next Tuesday to wire money to the Wall Street firm.
Goldman, which is investing $450 million of its own capital in Facebook, is raising at least $1.5 billion from its wealthy customers through the limited-time offering.
Investors are increasingly eager to buy shares of Facebook and other fast-growing Internet social networking companies on private exchanges.
