"Dear Potential Investors…"

The IPO Registration Statement filed by social network operator Facebook, Inc. on February 1 (SEC file no. 333-179287) contains an open letter from CEO & Chairman Mark Zuckerberg, making it the fifth internet/tech IPO registrant to do so since Google Inc. presented the concept in 2004 (333-114984).

Google founders Larry Page and Sergey Brin directly addressed a variety of things that they wanted prospective shareholders to know about the more personal side of the company’s history, mission, and values.  Inspired by Warren Buffet’s essays to shareholders in Berkshire Hathaway annual reports, the letter was subtitled "'An Owner's Manual' for Google's Shareholders" and ended up being placed in between the Risk Factors and a special prospectus section that discussed the novel Dutch Auction Process that determined the IPO price and allocation of shares.  Web hosting service provider Rackspace Hosting, Inc. included its 2008 Racker Letter to Investors in essentially the same position of its Dutch Auction IPO prospectus (333-150469).

Media software developer DivX, Inc. went public in September 2006 (333-133855) and was the first IPO issuer after Google to include a letter inside the prospectus.  The DivX founders stress a sentiment common with most letters to potential investors in digital media – the goal of enabling connection. The five DivX signators write, “We want to help creators create and reach broader and more diverse audiences. We want to help everyone become more engaged and forge deeper, more intensive connections.”

Another theme that tends to be addressed in such letters is a commitment to long-term shareholder value.  In the Letter From Our Founder included in the December 2011 IPO prospectus of online gaming developer Zynga, Inc. (333-175298), CEO Mark Pincus states "We will prioritize innovation and long-term growth over quarterly earnings. We will not make short-term decisions that sacrifice our core values or veer from our long-term vision."  The founder and CEO of e-commerce firm Groupon, Inc. strikes a similar note in the Letter From Andrew D. Mason: "When we see opportunities to invest in long-term growth expect that we will pursue them regardless of the short-term impact on our profitability" (Form 424B4 on 11/7/11, 333-174661). 

Both Zynga and Groupon place the letters directly after the Risk Factors section, which follows the Prospectus Summary.  The letters in the Facebook and DivX filings are placed between the MD&A and Business sections of the respective prospectuses.