Very surprising news out today in Silicon Valley. Facebook has let go of its chief financial officer Gideon Yu, reports the Wall Street Journal.
Facebook spokesman Larry Yu confirmed to BusinessWeek that CFO Yu will be leaving the company. Now the big question is, why?
The WSJ’s Jessica Vascellaro speculates in her story that the company needs to get a new CFO because it is thinking of going public sooner than expected. The search for a replacement, she writes, is “likely to renew speculation that Facebook, which has previously said it hopes to go public within the next few years, is stepping up plans to do so despite the rocky economy”.
But this is hard to believe, given the rough IPO market and the fact that Facebook is not yet profitable on GAAP basis. However, the company said at the same time it announced Yu’s departure that it has produced positive earnings before interest, taxes, depreciation and amortization, or EBITDA, for the past five quarters and expects to be cash-flow positive in 2010. Moreover, the fact that Facebook let go of CFO Yu without having a replacement suggests that this was an unexpected move.
Yu’s departure comes as he was in the process of trying to raise money for the fast-growing startup--one of his primary responsibilities as a CFO. Last week, news broke that Facebook was trying to raise as much as US$100 million in debt financing to pay for its rising technology costs.
Facebook may have a hard time raising money for reasons that go beyond the credit crisis affecting so many U.S. companies. The company received a rich US$15 billion valuation when Microsoft took a stake in the startup in October of 2007. It would be very difficult if not impossible to find an investor willing to give Facebook a similar valuation given the steep drop in equity markets over the last year.
“It makes it harder to raise money now,” says one Valley CEO of the US$15 billion valuation. “The capital strategy is the responsibility of the CFO. At the end of the day there is no one else to point to.”
In the meantime, here is Facebook’s official statement:
“Facebook confirms that CFO Gideon Yu will be leaving the company. Gideon has played an important role in helping us achieve our financial success, building a strong finance team and establishing the core financial operations of our company. We are grateful to Gideon for his contributions to Facebook and what we are trying to accomplish. Despite the poor economic climate, we are pleased that our financial performance is strong and we are well positioned for the next stage of our growth. We have retained Spencer Stuart to lead our search for a new CFO and will be looking for someone with public company experience.”
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