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Is Mark Zuckerberg a risk factor for Facebook's IPO?

Is CEO Mark Zuckerberg an obstacle to his own company going public?
Fox Business News correspondent Charles Gasparino is claiming that an internal J.P. Morgan document discussing Facebook's IPO cites Zuckerberg as a "risk factor." No other details were revealed in Gasparino's teasing tweet, but the correspondent promised to reveal more information on "FBN@11am."
But beyond Gasparino's limited tweet, Facebook's own S-1 filing with the Securities and Exchange Commission highlights some potential risk factors concerning Zuckerberg.
Obviously, the loss of Zuckerberg as well as other key personnel would hurt Facebook's business, the company noted. But even and especially with Zuckerberg at the helm, the huge number of shares and voting rights that he'll own could also spell trouble.
After the company goes public, Zuckerberg will "own or have the ability to control approximately 57.3% of the voting power" of the company's outstanding capital shares, according to the SEC filing. As such, that means the CEO will be able to control certain matters up for approval by the investors, including the election of board members as well as the management and direction of Facebook itself.
What if Zuckerberg's own interests differ from those of the stockholders?
"As a board member and officer, Mr. Zuckerberg owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders," the filing noted. "As a stockholder, even a controlling stockholder, Mr. Zuckerberg is entitled to vote his shares, and shares over which he has voting control as a result of voting agreements, in his own interests, which may not always be in the interests of our stockholders generally."
As a result, the voting power that will rest with Zuckerberg could impact both the company and its stock price.
"This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other stockholders support, or conversely this concentrated control could result in the consummation of such a transaction that our other stockholders do not support," the filing further noted. "This concentrated control could also discourage a potential investor from acquiring our Class A common stock due to the limited voting power of such stock relative to the Class B common stock and might harm the market price of our Class A common stock."
Facebook's IPO has already been delay. Management was scheduled to kick off a roadshow to promote the public offering, with trading slated to start May 14. But Zuckerberg has been tied up with other matters. With the roadshow now rescheduled for mid-May, the IPO could take off in June.
But will the risk factors cited in the SEC filing have any impact on the IPO? Facebook still seems on track to go public, so it's clearly counting on Zuckerberg to manage his voting rights in the best interest of the company rather than in the best interest of himself.
CNET contacted Facebook for comment. We'll update the story when we get more information.
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Facebook must convince investors of its value

Facebook took another big step toward creating the largest Internet public stock offering in history Thursday, but now the Menlo Park company is faced with the formidable task of convincing skeptical investors that the 8-year-old social network is worth more than $90 billion.
A decline in net income in the first quarter, an unclear path toward generating advertising revenue on mobile devices, and the company's recent $1 billion purchase of a photo app developer figure to be hot topics in upcoming road show meetings between Facebook executives and big investors.
"Facebook still has a halo, but in our judgment that halo has become smaller after its recent growth deceleration," said Sam Hamadeh, chief executive officer of PrivCo, which tracks private pre-IPO firms.
In a registration filed Thursday with the U.S. Securities and Exchange Commission, Facebook said its initial public offering will have 388 million shares priced from $28 to $35 each. At the high end of that range, Facebook and its current shareholders would net as much as $13.6 billion.
"Facebook will mostly be given the benefit of the doubt ... but they still have a lot to prove," Hamadeh said. "Especially after big IPO investors have been badly burned buying into the IPOs of Zillow, Groupon and Zynga, all of which are trading well below their IPO prices. They don't want to get burned again."
Higher price likely
Despite investor skepticism, the Facebook IPO will surpass the $1.67 billion Google raised in 2004 when it became the biggest Internet IPO in history. And it could give Facebook the fourth-biggest overall IPO in U.S. history, surpassing the $13 billion raised when Deutsche Telekom went public in 1996.
Analysts said the modest $28 to $35 range sets the stage for Facebook to price the stock even higher to take advantage of the anticipated demand. The final IPO pricing is expected on May 17, with the company debuting the next morning on the Nasdaq stock market under the ticker symbol "FB."
"Pricing is a bit light, I think because the underwriters want to see the stock pop on the open," said Michael Pachter, managing director of equity research for Wedbush Securities.
Hamadeh said Facebook's $70.4 billion to $88 billion valuation range will change because the "ultimate target valuation" is $95 billion to $100.5 billion. He expects Facebook to set the final IPO price at $38 to $40 per share. By including shares that underwriters have an option to purchase if demand exceeds supply, he said "the total offering size would exceed $15 billion."
Facebook's sheer size and influence has made it the most anticipated IPO in years. It has more than 901 million members worldwide who post 3.2 billion comments and upload 300 million photos each day.
CEO to maintain control
The company reported revenue of $1.06 billion for the first quarter of this year, up 45 percent from the same period a year ago. But net profit dropped to $205 million, a 32 percent decrease from the previous first quarter.
Chief Executive Officer Mark Zuckerberg, who co-founded the company out of his Harvard dormitory, plans to sell 30.2 million shares and in the process raise $1 billion for tax purposes. But with the shares he will retain, Zuckerberg will maintain a controlling 57.3 percent of the voting power.
The regulatory filing, made before the markets closed, signals that Facebook executives are ready to go out on their IPO road show with investors as early as Monday. In fact, Facebook posted a video version of the road show online Thursday afternoon.
But investors may grill Zuckerberg and other executives to show why they should bet on Facebook's future ability to expand advertising revenues, particularly because it doesn't yet have a proven ad strategy for the fastest-growing segment of its users - those who use mobile devices.