70m Facebook shares to be sold
Facebook and chairman and chief executive Mark Zuckerberg are selling a combined 70 million shares of Class A stock as the social media company prepares to join the Standard & Poor's 500 index.
The offering includes more than 41 million shares from Mr Zuckerberg, who will also buy Class B shares that carry more voting weight.
After a pre-market stock dip of more than 4% on the news, Facebook's stock recovered somewhat and was down less than 1% in afternoon trading today.
The company, based in Menlo Park, California, said today that the Class A shares will be offered mainly to index funds whose portfolios are based on stocks included in the index.
The S&P 500 will add Facebook tomorrow after markets close. The index is a list of companies that have a market capitalisation of more than 4 billion US dollars (£2.5 billion) and is meant to be a snapshot of the US economy.
At yesterday's closing price of 55.57 US dollars (£34.03) per share, that would put the total value of the offering, not counting expenses, at about 3.89 billion US dollars (£2.38 billion). Mr Zuckerberg's offering of 41.3 million shares would generate about 2.3 billion US dollars (£1.4 billion) based on yesterday's close, not counting expenses.
The company said Mr Zuckerberg will use most of the proceeds from his sale of Class A shares to pay taxes he will incur in connection with exercising an option to buy 60 million shares of Class B stock. He is also using part of it for charitable contributions.
It was Mr Zuckerberg's decision to sell shares that is believed to have led to Facebook's stock price decline.
That said, Standard & Poor's equity analyst Scott Kessler noted that Mr Zuckerberg's ownership has declined "only slightly" since Facebook's May 2012 initial public offering, and that the planned sale "would only minimally reduce his stake and voting power".
"We are not concerned by this news," Mr Kessler said in a note to investors, reiterating a "Buy" rating on Facebook's stock.
Each Class B share gives the shareholder 10 votes, while each Class A share comes with one vote. The deal will give Mr Zuckerberg control over nearly 63% of the voting power of the company's outstanding stock, according to a Securities and Exchange Commission filing.
Facebook will offer 27 million Class A shares, and the company expects to use any proceeds for working capital.
The company will have 2.54 billion Class A and Class B shares outstanding after the offering, or about 4% more than it had at the end of September.
Facebook's shares dipped 49 cents to 55.08 US dollars (£33.73) this afternoon. That is up about 44% from Facebook's 38 US dollars (£23.27) IPO price and down only slightly from the all-time high of 55.89 US dollars (£34.23) that it hit yesterday.