Zuckerberg Takes Control, You Get $100
Mark Zuckerberg must be one persuasive deal maker.
After eight years, Mr.Zuckerberg, the co-founder and chief executive of Facebook, has an ironclad grip on the social networking giant.
He owns 28.4 percent of all Class B shares, and through a chain of agreements with other shareholders, he has voting control over at least 57.1 percent of Class B shares.
And as DealBook’s Deal Professor, Steven M.Davidoff, noted in his recent column, Mr.Zuckerberg’s power is likely to increase over time as more Class B shareholders sell their stock.
Now, we know what shareholders got in exchange for ceding precious control: about $100 in cash apiece.
On Wednesday, the company filed a heap of documents with the Securities and Exchange Commission, including employee agreements; its lease contract for its campus in Menlo Park, Calif.; and shareholder agreements.
In its original prospectus for its initial public offering, filed last Wednesday, Facebook mentions three types of agreements that essentially grant Mr.Zuckerberg special voting control over other stockholders’ shares.
The group of investors who signed these agreements include early lieutenants, like Sean Parker, Facebook’s first president, and several of the company’s venture capital backers, like Yuri Milner’s DST Global and Accel Partners.
According to the agreements, released late Wednesday, investors signed away their voting rights in exchange for one Benjamin.
For instance, as noted in exhibit 4.3, “Form of ‘Type 1’ Holder Voting Agreement”: “This agreement is being entered into in exchange for a payment of $100 in cash from the Proxyholder to Stockholder and for other good and valuable consideration, the sufficiency of which is hereby acknowledged and agreed.”
According to a person briefed on the matter, the shareholder agreements do correspond with the agreements mentioned on Page 132 of the prospectus.
While the $100 payments were likely a formality, they provide yet another amusing symbol of Mr.Zuckerberg’s sway at Facebook and how early investors have subscribed to the belief that Facebook is indeed “a Mark Zuckerberg production.”
(Actually, according to Wednesday’s filing, there are apparently some limits to Mr.Zuckerman’s power. He is limited to 21 paid days off, per his employment contract.)