Sunday, October 3, 2010

Facebook did split their private shares again

A Reuters article did announce that Facebook is splitting their shares 5for1 (which are not yet on the stock market) which is the third split in the last 4 years.
This could have multiple reasons. One is that they can attract more good qualified people by offering 50,000 shares instead of 10,000 shares but at the same time not giving more money away. Or Facebook is still giving to new employees 10,000 shares and keep more in the pocket for Mark Zuckerberg.

Another reason could be that FB did want to reduce their shares price before going public. Facebook is right now valued at 26 billion at before the split a share was $89 (sharespost did adjust their shares after the split). The split helped to get the second market price down. If they would not do this split and would go public Facebook would need to have the initial trading price over $90 a share which would be harder for individual to invest in Facebook.
I assume Facebook is trying to keep the share price low to get as much as possible of their user base to buy shares. At the same time, i believe Facebook is supporting it's employees (unofficially) to post some of their shares at sharespost and secondmarket.
These two markets are helping Facebook to get their venture index as high as possible. Without the two markets, Facebook would have not been able in their last investment round to get 120 million dollars with an estimated value of 30 billion by giving less than 1% in shares.
Without it might would have cost Facebook 3%. Everybody is saying Mark Z. Is too young and he is a risk, this might be right, but he has some experienced people around him and so far it seems pretty smart what he is doing. The IPO will come he is just waiting for the right moment when he can make the most money out of it. Hopefully he is not waiting too long and misses the right moment.

Here is the Reuters article:

(Reuters) - Facebook, the world's No. 1 Internet social network, is splitting its stock, as shares in the privately held company have surged roughly seven-fold in the past 15 months.

A Facebook spokesman told Reuters on Friday that Facebook is enacting a 5-for-1 split of the company's shares in order to bring the value "back down into the range of other private companies."

Facebook has no plans for an initial public offering of the company's shares, said spokesman Jonny Thaw. He noted that Facebook has split its stock twice before, with a 4-for-1 split in October 2007 and another 4-for-1 split in July 2006.

With users at half a billion and counting, Facebook is closely watched by investors hoping to one day buy public shares in the fast-growing company.

A brisk market for Facebook's private shares has developed in so-called secondary markets, such as Sharespost and SecondMarket.

Recent bids for Facebook stock on Sharespost were at $85 a share and $80 a share, and contracts for Facebook shares at the end of August were made for $72 a share and $75 a share.

In June 2009, Reuters reported that shares of Facebook were being quoted on the secondary market for between $10 and $10.50 a share.

One person closely involved in the trading of private company shares said splitting the stock would allow Facebook to give employees and recruits a larger number of shares, even though the total value of the shares would not change.

"If you were going into Facebook, before they would have been able to say I'm going give you 10,000 restricted stock options, now they can say I'm going to give you 50,000; it sounds better," said the person, who wished to remain anonymous, adding: "It's all optics."

Stock splits are rare for private companies, but not unheard of. Before becoming a public company in 2004, Google Inc made two separate 2-for-1 stock splits in 2003, and other splits in years prior to that, according to regulatory filings.

Earlier this week, Facebook board member Peter Thiel told Reuters the company would probably sell shares to the public at some point, but not before late 2012.

Facebook has become one of the Web's most popular destinations, and is increasingly challenging established Web giants like Google and Yahoo Inc for advertising dollars, say analysts.

News of the stock split comes on the same day that The "Social Network," a not-entirely-flattering film about the creation of Facebook from a Harvard dorm room in 2004, opens in theaters across the United States.

Last week, Facebook co-founder Mark Zuckerberg announced that he would sell $100 million in Facebook stock to fund public schools in Newark, New Jersey.

- Posted using My iPad

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