Facebook has finally filed for its initial public offering. The social networking giant submitted an application to the Securities and Exchange Commission on Wednesday. It plans to raise up to US$5 billion.
CEO Mark Zuckerberg, who cofounded the company in February 2004, currently holds a 28.4 percent stake. Details in the SEC document illuminated the extent of Zuckerberg’s control over Facebook. He has the ability to control management and affairs at the company as well as the election of directors. Zuckerberg also has the ability to choose a successor in the event of his death.
Facebook will have a dual-class common stock structure, which gives public shareholders one vote per share and current shareholders, including Zuckerberg, 10 votes per share. Zuckerberg will likely to be able to control the outcome of any vote. Upon Zuckerberg’s request, his 2011 base salary of $483,333 will drop to $1 when the company goes public.
Facebook did not respond to our request for further details.
Visionaries Beat Managers
Does Zuckerberg have what it takes to run the increasingly complex Facebook as a public company?
“Founders of the most successful companies provide the driving vision and energy to realize the firm’s potential,” Roger Kay, founder and principal of Endpoint Technologies, told the E-Commerce Times.
“Bill Gates and Steve Jobs come to mind,” he continued. “Professional managers have their place, but while an industry is forming, the right person to keep the enterprise on track is more likely to be the founder.”
When a company goes public, though, everything changes — including, perhaps, the luster of the founder. A tug of war with Wall Street typically ensues after a public offering, Kay noted with Wall Street often pushing for a professional manager.
“Founders like Michael Dell push back and deliberately sacrifice current profitability to invest in long-term markets,” said Kay.
Zuckerberg will have to contend with this new constituency, he said, and it’s a bit of a devil’s bargain: liquidity versus accountability.
“Zuckerberg will need the right help, which, to a great degree, he’s already got,” Kay observed.
Keeping the Social Vision Alive
Zuckerberg was at Facebook’s helm as it exploded in growth, and much of the success of social networks in general can be attributed to his vision.
“Mark Zuckerberg does have the longest experience as head of a social networking company,” Azita Arvani, principal of the Arvani Group, told the E-Commerce Times. “So far, he has been able to attract savvy mentors to help him run the company.”
He has also recognized that his best contributions are product development and innovation.
“He hired Sheryl Sandberg as COO to take care of the rest,” said Arvani.
If Zuckerberg gets the right help, he can be successful leading a publicly traded Facebook she maintained. “As long as he is open and able to receive good advice from experienced executives to augment his own vision, and he brings in strong management to fill in the gaps, he will be a good CEO.”
The Road Ahead
Zuckerberg is not only the founder and CEO, but also the face of Facebook. In that role, he has become a cultural icon.
“You could draw many comparisons with Steve Jobs — that Zuckerberg has the same, young arrogance to go with the vision,” Zeus Kerravala, principal analyst with ZK Research, told the E-Commerce Times.
However, it isn’t likely that Zuckerberg will face the conflict with investors that plagued the young Jobs, he added.
“Zuckerberg is not only the founder of Facebook, he’s a cult-like figure at the company,” said Kerravala. “The CEO needs to have the vision of where social networking is going, and Zuckerberg clearly has that.”