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Why Facebook IPO Is a Bonanza for Wall Street
CNBC.com | January 31, 2012 | 11:37 AM EST

Wall Street is about to make $100 million thanks to a once obscure law passed nearly 50 years ago.

The law is a 1964 amendment to the Securities Exchange Act of 1934 that requires companies with over $10 million in assets and 500 shareholders to register under the Exchange Act.

Since registration carries all the costly disclosure of going public, many companies that hit the threshold decide that they might as well go public.

Facebook is in no hurry to go public. It has unlimited access to private capital, as last year’s Goldman Sachs sponsored deal demonstrated. Even after Goldman excluded U.S. investors from its offering, its Goldmanfunds were oversubscribed.

But because Facebook has far more than $10 million in assets and exceeded the 500 shareholder limit last year, the company is required to register with the SEC by April 29, 2012. It is likely to go public when it registers or sometime shortly afterwards.

Although the 500 hundred shareholder rule is often thought to be a shareholder protection provision, it has really never been anything more than a hidden subsidy for Wall Street. The principal beneficiaries of the rule are Wall Street investment banks and the stock exchanges.

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