Term Sheet

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Answering your Facebook IPO questions

March 28, 2012: 4:36 PM ET

Earlier today, Bloomberg reported that Facebook "is halting the trading of its shares on secondary markets by the beginning of April as it prepares for an initial public offering."

Fortune has since confirmed the news with multiple sources, so here's a quick Q&A on what's happening and why:

1. Is this just a temporary suspension of private trades, like we saw in January before the company filed its S-1? 

No, this one is permanent. After next week, no new trades can be consummated (it's this Friday for SharesPost trades). Both Groupon (GRPN) and LinkedIn (LNKD) also halted private market trading in their shares before going public, albeit a bit later in the process.

2. Does that mean Facebook is going public in April?

No, because private trades actually can take up to 33 days to close. First, Facebook has up to 30 days to act on its right of first refusal (ROFR), even though it doesn't really do so anymore. Then the paperwork and account transfers take another 2-3 days. So if the final private Facebook trades were this Friday, the company likely would wait until at least May 2 before going pricing its IPO.

3. Didn't we already know Facebook planned to go public in May?


4. Then why is the Wall Street Journal blasting it over its homepage like some giant exclusive?


5. Until now, has there still been an active private market for Facebook shares?

Yes, although buyers and sellers have mostly been talking past each other on price. In other words, there has been a lot of buyside and sellside interest in recent weeks, but not too much actual deal-making.

6. Is there any chance that Facebook will withdraw the entire offering, since the JOBS Act raises the 500-shareholder limit to 2,000?

Not really, because the company issues restricted stock units to employees that only convert to common stock if the company goes public or gets sold. And, if Facebook makes those employees sit on their RSUs much longer, there will be revolution in Palo Alto.

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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