Now Facebook employees (past and present) have an opportunity to cash out some of their stock, lifting some of the pressure on the company to go public.
Russian Digital Sky Technologies (DST), which invested $200 million in Facebook in May, is moving forward with its offer to purchase $100 million of Facebook common stock for $14.77 per share. If shareholders fully accept DST's offer, it will give the Russian fund a 3.5 percent stake in the company. This is no surprise; it's part of the plan announced with DST's investment in May.
This common stock purchase price values the company at $6.5 billion, while DST's purchase of preferred shares in May valued the company at $10 billion. (Microsoft's$240 million investment in Facebook in October 2007 valued the company at $15 billion). Facebook is enthusiastic, pleased that the employee buyback program is giving shareholders a chance at liquidity at a higher value than a price discussed last fall. And the lower valuation reflects common rather than preferred stock. And still, this is a pretty hefty valuation for a company that's just barely past the startup stage.
CEO Mark Zuckerberg released this statement: "While individuals must make their own decisions about participating in this program, I’m pleased that the price DST is offering is much greater than the price originally considered last fall. This is recognition of Facebook's growth and progress towards making the world more open and connected.”
Bottom line: this allows shareholders to get a nice chunk of change from a company that says it has no plans to go public, hence eliminating some of that pressure on the company. An additional benefit to Facebook: this kind of stock trading is easier to control and regulate than some previously-. And some employees will consider holding out for a higher valuation or an IPO. The number of employees that take this deal could give a hint at how soon they're expecting another option to exit.
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