That is because the residents of a certain complex in Menlo Park, California have been forced to stop running their mouths following Facebook's S-1 filing for an initial public offering yesterday. The Securities and Exchange Commission requires a "quiet period" for any company preparing to go public. It is a bit of karmic justice for the ruckus caused when a company files its S-1. Facebook will be allowed to communicate some information, but nothing that could possibly influence investors. For a company that values the free flow of information, you might think that would be a problem. For Facebook? Probably not.

"Non-reporting issuers are, at any time, permitted to continue to publish factual business information that is regularly released and intended for use by persons other than in their capacity as investors or potential investors," the SEC explainer page on the quiet period states.

In plainer English, that means that investors do not get any information regarding the financial performance and critical infrastructure of a company. Communications with non-investor entities is permitted.

What does that mean for Facebook? Business as usual, more or less. Mark Zuckerberg's company has never been one to flaunt its financial progress. Facebook put off its IPO for as long as possible in "the hacker way." It wants to create products to make the platform better for more people. Being beholden to investors has never been comfortable for Zuckerberg. In an interview with 60 Minutes in 2008, Zuckerberg laid out his notion of what it means to go public.

"Really what we are focused on is not that exit strategy, it is on how do we build just the best thing possible," Zuckerberg said. "As a private company we have that advantage of not having to report to the outside world all of our financials. This is something that I think burdens a lot of public companies, having to go through and publicly state exactly where they are spending their money and where they are making money forces them to focus on things that will make the company look good, as opposed to the things that are actually important to building, long term, a great product and a great company."

Facebook finally released those financial numbers yesterday though likely not because the company wanted to but rather because the SEC would eventually force it to do so. When that happens, a company can stay private with its financials exposed or move forwards with an IPO to build capital that will help it with liquid assets that can help it grow.

Yet, Zuckerberg's reluctance to go public should make Facebook's quiet period, well, quiet.

Two large technology companies laid the groundwork in 2011 for Facebook's announcement and registration with the SEC. Each is a stark difference from the other. LinkedIn filed its S-1 papers in June 2011. It showed solid, if unspectacular numbers. LinkedIn CEO Reid Hoffman held his tongue during the quiet period as Wall Street and the tech world dissected the S-1. When LinkedIn rung the bell and started trading publicly, its shares popped to levels that not many expected. It has stayed within that range since.

On the other hand, there is Groupon. Its S-1 was probably one of the more controversial business documents to be released in 2011 more or less because of the way it calculated revenue and company culture. Unlike LinkedIn, Groupon's CEO Andrew Mason could not help but chafe at the critics that tore up his company while he was forced to take it and be quiet. A "leaked" memo to the Groupon staff from Mason surfaced several months before the company started trading, a memo that later would be investigated by the SEC for breaking the quiet period rules.

What the quiet period means to the Facebook ecosystem is that business will continue as normal. Developers will get the information they need, users will be told about platform problems and updates. Facebook will likely not announce any major new products during the quiet period but expect a barrage of new verticals and innovations once the company finally does start trading, likely in June or July.

The inverse aspect of the quiet period for a company is that everybody not forced by the SEC to be quiet will be exceptionally loud. Take a look a Techmeme's top stories for today. The top 11 stories are Facebook IPO related.

After the luster from the S-1 blows off, the news coming out of Facebook will slow to a trickle. After the madness of the last 24 hours, everyone will be able to breathe a sigh of relief.

Including Facebook.

It becomes the second major tech company after LinkedIn to aim for the public market in the last month. The difference between Groupon and LinkedIn though is that Groupon makes significant revenue, has been around half as long as LinkedIn and may or may not actually be a technology company. What are the revenue and risk factors for investors thinking about Groupon stock? We take an in-depth look below.

Groupon measures its key operating metrics in terms of subscribers, customers, featured merchants and Groupons sold. In the first quarter of 2011 Groupon boasted 83.1 million subscribers worldwide with 15.8 million cumulative customers over 56,781 merchants. That equates to about 28 million Groupons sold in the quarter ending on March 31. In comparison to 2010, that is about 26 million more Groupons sold in the same time frame. So, the idea is: if you grow your business by $250 million in corresponding quarters (almost $20 million, first quarter 2010 and $270 million, first quarter 2011) then it is time to go public.

Weighing the Risk Factors

Groupon warns that it may not maintain the revenue growth that it has experienced since inception. It went from $3.3 million in the second quarter of 2009 to $644.7 million in the first quarter of this year, so that is a fairly reasonable warning. Groupon also does not know if the business model can be sustained or maintained.

"Our business has grown rapidly as merchants and consumers have increasingly used our marketplace," Groupon wrote in the S-1. "However, this is a new market which we only created in late 2008 and which has operated at a substantial scale for only a limited period of time. Given the limited history, it is difficult to predict whether this market will continue to grow or whether it can be maintained. We expect that the market will evolve in ways which may be difficult to predict."

Other risk factors for Groupon include: failure to retain or acquire subscribers; failure to stave off net loses due to operating expenses; failure to add or maintain new merchants; failure to hold off competition and clones; failure to recover subscriber acquisition costs (marketing expenses such as the infamous Super Bowl ads); disruption of email chain or email restrictions; international growth problems.

Those are the highlights of Groupon's risks, though the S-1 does go on for about 10 more pages outlining potential harmful market conditions including government regulation of e-commerce or losing members of the managerial team.

Operating At A Loss, But Come Along for the Ride

The majority of Groupon's revenue in the first quarter of 2011 was international with $346.8 million in sales accounting for 53.8% of revenue. The net loses mentioned in the risk factors could be detrimental to Groupon's long term viability. In the "net loss attributable to stockholders" column, Groupon lost $2 million in 2008, $6.9 million in 2009, $456.3 million in 2010 and $146 million so far in 2011.

The beginning of the Groupon S-1 filing starts with a letter to potential stockholders from CEO Andrew Mason. In it he states that Groupon spends aggressively on growth, is always reinventing itself and that it is "unusual and we like it that way."

"If you're thinking about investing, hopefully it's because, like me, you believe that Groupon is better positioned than any company in history to reshape local commerce," Mason said. "The speed of our growth reflects the enormous opportunity before us to create a more efficient local marketplace. As with any business in a 30-month-old industry, the path to success will have twists and turns, moments of brilliance and other moments of sheer stupidity."

That's right, to escape small cap hell you need to have a market cap over $2 billion.

What Does It Feel Like To Be In Small Cap Hell?

Lonely. Nobody cares about your little venture. To the team that endured blood, sweat, toil and tears to get to $50 million in revenues, and then go through all the SEC gyrations to become a public company, that is tough to accept. Here is what you can do.

1. Hire a strong investors relations team and send out lots of press releases, be accessible to the press, go on road shows and speak at conferences for investors. Your IR team can take care of the mechanics, but this is also a big time-suck for the CEO and CFO. (And you cannot say, "Sorry we missed our numbers we were too busy schmoozing folks like you.") The result is a lot of work and you have to do it - but the payoff is small. Every other small cap is doing the same thing.
2. Buy back your own shares. That tells even the most dimwitted investor that you think the stock is undervalued, and as you run the company you probably know. This is fine if you personally are vastly wealthy or you have massive amounts of cash laying idle on the company balance sheet. In other words it is not an option for most companies

Social Media IR Rides To The Rescue?

Agoracom is a modern IR firm. They use online methods to tell your story. That may not sound like a big deal, but IR is a pretty conservative business, so just using a few tools like Twitter intelligently is a big step forward.

Agoracom's pitch is that they can "tell your story". For a while there will be an opportunity to use modern methods while your competitors are stuck with their buggy whips. But that advantage will erode really fast. So this is where the new Finance 2.0 sites like Seeking Alpha, Stocktwits, Kaching and Covestor may have the key.

I decided to test this on the 14 publicly traded SaaS companies.

Finance 2.0 For Small Cap: It is Too Early To Tell

Select a classic small cap stock in the SaaS Index. For example: RightNow Technologies (RNOW). At time of writing, they have a market cap of $525 million. It is a cool company that is growing fast and delivering good results for customers. So how much coverage do they get on these new sites? In my test I looked at RNOW for the period Jan. 1 to March 1.

StockTwits: There were nine tweets about RNOW, and many of them mentioned RNOW among a list of other stocks. Some are not very helpful, such as: "Does anyone know the future of $rnow ?"

SeekingAlpha: This has two posts that were specific to RNOW and they seemed high quality. That is better than nine tweets that don't say much.

Covestor: This is interesting to play around in. You can see the last 10 trades done by Covestor members in RNOW. But you cannot drill from that to any rationale into RNOW. The system is set up to do that, but there is just nothing there yet.

Kaching: This gave good news aggregation on RNOW. It looked better than YahooFinance (still the starting point for lots of investors) but seemed to lack depth. Nor did it have any fundamental new information.

So, from the limited perspective of one small cap, these sites are at this time not the answer.

What about "ye olde stock forum" on Yahoo Finance? Their message board for RNOW for the same period of time has 28 posts, not including the threaded replies. That puts them way ahead of the newcomers.What about quality you ask? What is the use of a lot of noise from anonymous posters pushing the stocks they own (or panning the ones they short)? That seems to be the problem with all these sources.

Wanted: Patient, Long-Term Investors

Found: Momentum-chasing day traders.

You want investors who will buy into the quality of your technology, understand your value proposition, like the market you are in and think you are doing a reasonable job managing the business. In other words, you want Warren Buffett.

That is not what these new sites are delivering. They do not seem to be the key to escape from small cap hell.

Let Your Story Surface

The evolution seems to be:

1.0 Tell Your Story. This is standard investor relations. The updated version of IR is to be present where investors hang out, which today means online. But it is still the old broadcast model.

2.0 Let The Crowd Tell Your Story. This is classic social media - and it suffers from classic social media problems. You might trust a user-generated review on Yelp before going to a diner, but you are likely to be a bit more nervous before investing your kid's college fund in a company.

What we need is something that reverses the flow, that lets investors discover you, that lets your story surface. This is where XBRL may help. (For a basic intro to XBRL read our earlier coverage.)

The Current XBRL Disconnect For Small Cap Is Temporary

XBRL was not any help when I was compiling the data for the 14 companies in the SaaS Index for the Saas Insights Report (a paid report for investors available from CapitalMarkets.com. Disclosure: The guest author wrote this report). The reason is simple. Only one out of 14 reported to the SEC in XBRL format. That company is Salesforce.com (CRM). The reason for that is also simple: The SEC currently mandates that companies with a market cap higher than $ billion report using XBRL. That is what creates the disconnect:

1. XBRL will enable the good investments from small cap companies to surface, but,

2. Only big cap companies report using XBRL (and they have no trouble reaching investors).

The good news is that disconnect is temporary. The second wave of new XBRL filers in 2010 is estimated to include 1,500 - 2,000 reporting companies, and the final wave in 2011 is for about 10,000 additional companies.

Imagine the Information Discovery Tools

When I go to my local wine store, the owner asks me what I want and we have fun with my standard reply that I want something "incredibly delicious and ridiculously cheap". Investors want the same. Warren Buffett got to be one of the richest men in the world by finding a few of those.

When all companies file in XBRL (and some geeks have created some neat tools to help sip more effectively from that firehose), ordinary investors will be able to create really powerful filters to find those "incredibly valuable and ridiculously cheap" companies.

They won't find them among the big cap companies. They will find them among the thousands of small cap, micro cap (and yes, even nano cap) companies. When the value surfaces, they can reach out to IR who can them tell their story.

Of course, when all this pans out, the opportunity to find the bargains will disappear. That is the price of an efficient market.

But the value to all the companies trapped in small cap hell will be immense. They can focus on building value knowing that the value they create will surface.

And that will have a great impact on the innovation economy.

Photo credit: Chris Whiteside

The full text of the SEC complaint is here and key points are summarized below. Update: For a really strange twist to this story, see this email exchange reported on by the NYT.

Key Sections of the SEC Complaint

According to the SEC report:
"Despite agreeing in June 2004 to keep material, non-public information about an impending stock offering by Mamma.com Inc. confidential, Cuban sold his entire stake in the company - 600,000 shares - prior to the public announcement of the offering. By selling when he did, Cuban avoided losses in excess of $750,000...Unless enjoined, Cuban is likely to commit such violations again in the future." (emph. added)

Mamma.com was considering raising capital through a private placement known as a PIPE ("private investment in public equity") offering. In doing so they reached out to Marck, their largest shareholder.

"On June 28, 2004, the CEO sent an email message to Cuban titled 'Call me pls,'
in which he asked Cuban to call him 'ASAP' and provided both his cellular and office telephone numbers. Cuban called four minutes later from the American Airlines Center in Dallas, home of the NBA's Dallas Mavericks, and spoke to the CEO for eight minutes and thirty-five seconds.

"The CEO prefaced the call by informing Cuban that he had confidential information to convey to him, and Cuban agreed that he would keep whatever information the CEO intended to share with him confidential.

"Cuban became very upset and angry during the conversation, and said, among other things, that he did not like PIPEs [the particular method of fund raising Mamma was planning on] because they dilute the existing shareholders. At the end of the call, Cuban told the CEO 'Well, now I'm screwed. I can't sell.'"

It all seems pretty straightforward, if a matter of he said she said, but we do wonder - why now? Who did Cuban anger recently to be charged with this 4 years after it allegedly happened?

Photo: Mark Cuban at Blog World Expo, Creative Commons by Marc Levin