The Securities and Exchange Commission's pre-IPO correspondence with Facebook makes it clear that the regulatory body seemed quite concerned with the impact mobile growth could have on its operation.
"Assuming that the trend towards 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 to Facebook back in February after a review of the company's S1 Registration statement filed with the government body.
Facebook's mobile efforts have been a growing concern for investors. Prior to its IPO, the company acknowledged that it has no easy way to monetize its mobile users, and an increasing number of people are accessing its service from smartphones and tablets. In response to the SEC's concerns about fully disclosing that problem to investors,to fully illustrate the impact the trend could have on its business:
We believe this increased usage of Facebook on mobile devices has contributed to the recent trend of our daily active users (DAUs) increasing more rapidly than the increase in the number of ads delivered. If users increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected.
The SEC's correspondence with Facebook is by no means unique. Upon filing registration statements with the governing body, companies will often receive letters from the SEC asking for clarification or more details on a particular topic. In addition to mobile, the SEC asked Facebook for clarification on everything from its partnership with Zynga to conversions related to Class A and Class B common stock. The social network addressed each question or concern in subsequent S1 filings.
Facebook's IPO has become a lightning rod of controversy. After a Nasdaq mishap, the company's shares have plummeted from their opening price of $38. As of this writing, Facebook is trading at $28.72.
Facebook has declined CNET's request for comment.
This story has been updated throughout the morning.