A rumor hit this week that Facebook has added three banks to work on its upcoming initial public offering.
Additionally, a report surfaced that Facebook is seeking an extended line of credit.
Media reports indicated Facebook wants an expanded credit line in order to help pay IPO taxes once the company goes public.
Facebook had previously indicated the company plans to pay taxes on its employees' restricted stock units (RSUs), and these taxes are expected to be massive.
Reuters reported this figure is probable to be billions of dollars, and amount would be determined on stock prices at the time.
"All these tax obligations are being created and you need cash to take care of it. You see this all the time but in this case it will be substantial," said Michael Moe of GSV Capital, told Reuters. GSV Capital owns Facebook shares. "Having the cash to be able to take care of that makes a lot of sense. That would be the motivator of a larger credit facility."
This type of arrangement associated with an RSU is reportedly to be rare for employers, and it will be expensive tab for Facebook to pick up. Once this obligation is paid, Facebook may not have the credit it desires to use for other purposes. The new banks in on the deal would potentially extend the amount of available credit intended to be used for business opportunities and growth.
"It could create such a large cash obligation that it eats up most of the credit facility," Bart Greenberg told Reuters. "That facility may have been originally set aside for acquisition opportunities or working capital."
Greenberg is a partner at law firm Haynes and Boone LLP who advises start-up tech companies.
Bloomberg reported Facebook hired Deutsche Bank, Credit Suisse Group and Citigroup Inc. to work on its IPO. This information was reported to come from a person with direct knowledge, but was not identified, because the information has not been officially made public.
Neither Facebook or the banks provided media with a comment regarding these rumors.
Bloomberg's source said the additions of new banks will be revealed in the near future with a new regulatory filing.
Morgan Stanley, JPMorgan Chase & Co., Goldman Sachs Group Inc., Bank of America Corp., Barclays Plc and Allen & Co. were the previously listed hired on the IPO.
With the additional banks on-board, Facebook would potentially increase its current available credit and create a possible $5 billion in credit.
At the time if its IPO filing with the U.S. Securities and Exchange (SEC), Facebook had reported $3.7 billion in revenue in 2011.
Facebook is widely speculated to be the largest Internet IPO in history.
Many are questioning whether or not, however, if Facebook stock would be a solid long-term investment.