Wall Street Journal
Facebook Inc. took steps to solidify the control of founder Mark Zuckerberg and other existing shareholders in the event the social-networking company goes public.The closely held Silicon Valley firm, emulating one of Google Inc.'s well-known strategies, established a dual-class stock structure that would increase the voting power of Mr. Zuckerberg, who is the company's chief executive, and other existing shareholders if they hold onto their shares during an IPO.
Facebook said Tuesday the move shouldn't be construed as a signal that the company is planning to go public, saying it has "no plans" to do so "at this time."
It said it is introducing the structure "because existing shareholders wanted to maintain control over voting on certain issues" and "focus on the long-term."
As part of the plan, Facebook will convert existing holdings to Class B stock, which carry 10 times the voting power of Class A stock, according to a person who has seen documents outlining the plan.
Those shares will remain Class B shares unless the owner sells them following an initial public offering, at which time they will become Class A shares, this person said.
Mr. Zuckerberg, who is 25 years old, has said in recent interviews that the company plans to go public eventually. If that happens—and existing investors hold onto their shares—the dual-class structure would enhance their control and make it easier to fend off unwanted suitors.
Mr. Zuckerberg, already the company's largest shareholder, has a percentage stake measured in double digits, according to people familiar with the matter. He already wields the most power among investors through board seats he controls.
Mr. Zuckerberg, who is 25 years old, has said in recent interviews that the company plans to go public eventually. If that happens—and existing investors hold onto their shares—the dual-class structure would enhance their control and make it easier to fend off unwanted suitors.
Mr. Zuckerberg, already the company's largest shareholder, has a percentage stake measured in double digits, according to people familiar with the matter. He already wields the most power among investors through board seats he controls.
Others with sizeable stakes include co-founder Dustin Moskovitz and Sean Parker, the company's founding president, along with early investor Peter Thiel and Accel Partners, a venture capital firm.
Facebook declined to comment on the ownership stakes.
The fast-growing company, which operates one of the most popular sites on the Web, said earlier this year it is generating positive cash flow and that revenue in 2009 is expected to be up more than 70% from 2008.
Mr. Zuckerberg has taken a number of steps to buy the company more time before going public, most recently allowing some employees to sell up to a million dollars in stock through a private buyback program. Under that program, Digital Sky Technologies purchased shares from Facebook employees at a price that valued the company at $6.5 billion.
If Facebook chooses to raise more money it is unclear whether the company would issue Class A or Class B shares or which currency it would use for potential acquisitions.
Facebook declined to comment on the ownership stakes.
The fast-growing company, which operates one of the most popular sites on the Web, said earlier this year it is generating positive cash flow and that revenue in 2009 is expected to be up more than 70% from 2008.
Mr. Zuckerberg has taken a number of steps to buy the company more time before going public, most recently allowing some employees to sell up to a million dollars in stock through a private buyback program. Under that program, Digital Sky Technologies purchased shares from Facebook employees at a price that valued the company at $6.5 billion.
If Facebook chooses to raise more money it is unclear whether the company would issue Class A or Class B shares or which currency it would use for potential acquisitions.
