After a secondary stock offering, Facebook officially joined the S&P 500, effective as of the close of trading on Friday, December 20. Facebook announced the secondary offering, consisting of 70 million shares of its Class A stock, on Thursday, December 19. Co-founder and CEO Mark Zuckerberg will sell 41.35 million shares; board member Marc Andreessen will sell 1.6 million shares; and Facebook is offering 27.05 million newly issued shares.
Facebook has priced the secondary shares of Class A stock at $55.05 per share, slightly below the $55.12 closing price of Facebook’s stock on Friday, December 20. In its press release, Facebook said that it intended “to use the net proceeds…from this offering for working capital and other general corporate purposes.” They added that they “may use a portion of the proceeds…for acquisitions of complementary businesses, technologies, or other assets.” The offering is expected to close on December 26.
Facebook has proved resilient, as its mobile advertising has soared, raising its revenue. The company’s stock has more than doubled in value so far this year, after rebounding from a low of $17.55. The stock is now well above the $38 price set in Facebook’s initial public offering 19 months ago.
Zuckerberg will continue to be Facebook’s controlling shareholder. According to SEC filings, Mr. Zuckerberg will exercise his option on 60 million class B shares. He will then use the proceeds raised from the sale of the 41.35 million Class A shares to satisfy the taxes that he will incur from the purchase of Class B shares. Each share of Class A stock is entitled to one vote, while Class B shares are entitled to 10 votes. Therefore, following this second offering, Zuckerberg will control 62.8% of Facebook’s voting power, down from 65.2%.
Facebook will raise about $1.5 billion by selling its 27 million shares, while the entire transaction is valued at $3.85 billion. Facebook’s total cash reserves are now totaled at about $10.8 billion. According to a Wall Street Journal analysis, Zuckerberg will likely have about $1 billion remaining from the sale, after paying the required taxes. Zuckerberg is also donating 18 million shares – valued at about $900 million on December 19 – to a non-profit, the Silicon Valley Community Foundation. His donation is the largest ever to the foundation.