Facebook CEO Mark Zuckerberg is selling shares to help pay taxes, joining the company and board member Marc Andreessen in an offering worth about US$3.9 billion (NZ$4.7b).
About 27 million shares will be offered by Facebook, with an additional 41.35 million shares by Zuckerberg and 1.6 million from Andreessen, the company said in a statement.
The follow-on sale, the first that Facebook has filed for since its May 2012 IPO, could raise about US$3.9 billion based on the company's closing price today.
The move comes a day before Facebook joins the Standard & Poor's 500 Index, an event that triggers demand from index funds and other institutions to own a company's stock. S&P had announced that as of the close of trading on December 20, it plans to include Facebook's Class A common stock in the S&P 500 Index, the company said.
"It's never a positive sign when insiders are dumping massive quantities of stock," said Todd Lowenstein, a portfolio manager with Highmark Capital, which oversees about US$19 billion in assets.
Yet "the company is now being added to the S&P 500 Index so there will be large demand for the shares from index buying and index hugging money managers. So it seems this will be absorbed without much disruption."
Facebook said it will use the proceeds for working capital and other corporate purposes, while Zuckerberg will use the majority of his proceeds to pay taxes he will incur in connection with his exercise of an option to purchase 60 million shares.
"We do not currently have any specific uses of the net proceeds planned," the company said in a filing. "We may use a portion of the proceeds to us for acquisitions of complementary businesses, technologies, or other assets."
Shares of Facebook have more than doubled this year. The stock fell less than 1 percent to US$55.05 as of 4pm Thursday in New York.
Zuckerberg's share sale, plus a gift of 18 million shares to charity, accounts for about 11 percent of his Facebook holdings. Along with a share sale for tax purposes and a charity contribution last year, the CEO has sold or gifted about 20 percent of his Facebook stake. Andreessen's sale in the follow- on offering forms 35 percent of his 4.6 million Facebook shares, according to the filing.
Vanessa Chan, a spokeswoman for Facebook, declined to comment beyond the statement. Margit Wennmachers, a spokeswoman for Andreessen's venture-capital firm Andreessen Horowitz, also declined to comment. Bloomberg LP, the parent of Bloomberg News, is an investor in Andreessen Horowitz.
Facebook's joining of the S&P 500 cements a comeback for the company after its stock plunged in the wake of its IPO. The world's biggest social-networking company has since introduced numerous mobile advertising products, as its more than 1 billion members shift to using the service on smartphones and tablets.
This week, Facebook said it is testing video advertisements that automatically play in users' news feeds, in a bid to catch up with other websites offering online commercials. The first promotions are starting to run this week, the company said December 17.
While advertisers can already upload videos to their Facebook page and broadcast them to a user's news feed, the new service will let marketers buy their way directly into a person's feed, according to two people familiar with the plans.
Facebook and the underwriters of its IPO must face a class-action lawsuit by investors claiming the company misled them about its financial condition, US District Judge Robert Sweet in Manhattan ruled in an opinion dated December 11.
- Washington Post