Chillin' out till it needs to be funded
The Facebook IPO will include select secondary sales from existing investors and employees and Sheryl’s boss earned only $1.5 mln in 2011. Though Sheryl Sandberg has not received more than 0.1% in Facebook stake, and a couple of other employees including Mike Schroepfer, Chief of Engineering and David Ebersman CFO have earned $30 mln, $18 mln and $24 mln in Stock awards, the founder is set to make up in 120 mln class B (10:1 voting entitlement) options to be vested pre IPO. thus the founder is going to be selling $1.67 bln worth of equity in the IPO so that Facebook can compute his tax and pay that from the IPO proceeds. Schroepfer and Sandberg make $800k and $1.2 mln approximately
Similarily Facebook will also be booking a compensation expense that is much higher this year with many other vested the 167 mln
non qualified stock options already issued by the company. According to Reuters, the company paid a 41% tax rate this year as its could not use international losses as deductions nor some of the stock awards. Stock option expense can be treated as compensation in Facebook’s income statement
The 120 mln options would amount to another $5 bln in tax valuation as comp expense and were issued in 2005.
The co founder David Moskovitz owns 7.5% of the stock . Sheryl’s boss earned only $1.5 mln in compensation in 2011. Washington Post Chairman Donald Graham and Marc Andreessen are his designees on the Facebook board as Directors. His father Edward Zuckerberg did not exeercise stock options awarded for Financial assistance during the first few years but independently recd a 3% share of the company from Facebook . His family, Randi Zuckerberg was also employed with Facebook for two years till earlier this year, earning $350k. Accel Partners and James Breyer are the largest sareholders after Zuckerberg’s 56.8% stake at 11.4% each, while GS nemesis Peter Thiel owns only 2.4%. Yuri Milner’s GST Global owns 5% of Facebook Some of these investors could still add their holdings to the sales in the IPO once pricing is firmed up.
Meanwhile “Grown up” Lady Sheryl is unlikely to increase her stake in Facebook and prefers cash compensation. Retail investors are unlikely to be allocated shares in the IPO and will wait to buy on FB ticker trading at NYSE or NASDAQ. The book building is thus likely to cater to a higher price point if qualified bidders are ready for the challenge.
Reuters, WSJ, FT, Business Week and WashPo are good sources for Facebook news as always for all our Insight pieces
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