SEC: Facebook Can Keep Hiring, Stay Private

    November 21, 2008

Deals involving Google and Microsoft may get the government feeling nervous, but so far, Facebook’s growth isn’t causing much anxiety.  The SEC has given the social networking company special permission to keep hiring and handing employees equity without publicly sharing its financial data.

What would have happened otherwise?  Well, Spencer E. Ante states, "Under the Securities & Exchange Act of 1934, a private company must start disclosing financial results publicly once it has more than 500 stockholders and $10 million in assets.  It’s the same law that helped push Google to go public back in 2004."

So, without the SEC’s approval, Facebook might have either had to go public at a very inopportune time, or change its hiring and compensation procedures.

SEC Seal

Facebook got something of a free pass, though.  After a law firm representing the company put together a 10-page document asking the SEC for an exemption, Anne Krauskopf, Senior Special Counsel, responded with 165 words.

To hit the highlights, she wrote, "Based on the facts presented, the Division will not object if Facebook, Inc. does not comply with the registration requirements of Section 12(g) of the Securities Exchange Act of 1934 (the ‘Exchange Act’) . . . .  This position will remain in effect until the earlier of (1) the date that Facebook, Inc. otherwise becomes subject to Exchange Act registration or reporting requirements with respect to any other class of its securities, or (2) the date of a Change of Control . . ."