Recently released documents reveal that the U.S. Securities and Exchange Commission probed Facebook's pre-IPO S-1 documents and requested that the company hand over additional information before going public on May 18.
Bloomberg reports that, among the data requested from Facebook, the SEC was keen to learn about how the company's growing number of mobile users could affect the company's revenue.
“Assuming that the trend toward mobile continues and your mobile monetization efforts are unsuccessful, ensure that your disclosure fully addresses the potential consequences to your revenue and financial results rather than just stating that they ’may be negatively affected,’” the SEC wrote on February 28, per Bloomberg.
Facebook admitted in its S-1 documents that increased mobile usage was a potential risk to the company.
Poring over the correspondences between the agency and the social network, Business Insider found that the the SEC also demanded more details about how many of Facebook's monthly active profiles (more than 900 million, according to Facebook) belong to individual users versus brand pages. The SEC also asked for the number of users who had deactivated their profiles and asked "why such disclosure is not material to investors."
Other requests from the agency concerned several risks outlined in the company's S-1, including CEO Mark Zuckerberg's control of the company, Facebook's relationship with social gaming giant Zynga, the amount of user data that Facebook is privy to and how it's used, and more. The company's proposed purchase of photo-sharing app Instagram was also a topic of interest.
In back-and-forth, the SEC did not raise questions about the company's impending IPO. Forbes explains further:
The correspondence does not indicate any concerns about the IPO ahead of what turned out to be a rocky debut for the company, nor anything like the accounting concerns that came up before Groupon‘s offering, when regulators took issue with how the daily-deal site was accounting for its marketing spending.
Facebook's lackluster IPO led to a number of shareholder lawsuits. The social network is reportedly preparing to request that these motions be consolidated, according to a New York Times report. The Times also said that the lead underwriters of the IPO (Morgan Stanley, Goldman Sachs and JPMorgan Chase) will join the request.
"While the document is expected to be relatively thin on detail, it will provide some perspective on Nasdaq’s role on listing day and the effect its actions had on the stock’s trading activity, the person briefed on the matter said," wrote the Times. "Facebook is expected to place some blame on Nasdaq, the person added."
A Facebook rep was not immediately available to comment.
Flip through the gallery (below) to view some of the biggest risks to Facebook, as outlined in the company's S-1 filings with the SEC.
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