Facebook grilled before IPO debut
As facebook’s much-anticipated recent public stock offering approached, federal regulators wanted to know more about the revenue it gets from mobile devices, its $1 billion deal to buy Instagram...
...and the control CEO Mark Zuckerberg has over the company.
Communications in the months leading to facebook’s IPO have received greater scrutiny because of investor concerns about the company’s ability to make money from its growing mobile audience.
Facebook’s stock price – though it finally closed with a gain at the end of last week for the first time since its IPO a month ago - has lost more than a fifth of its value since the debut. Many analysts, however, do hold positive long-term opinions.
Documents filed on Friday show the back-and-forth the social-networking company had with the Securities and Exchange Commission on a variety of issues before the launch.
The SEC asked Facebook what it would mean if more of its users accessed the site through mobile devices rather than traditional computers. Facebook admitted that the number of users logging in on mobile devices was growing faster than revenue - largely because it showed relatively few ads on mobile devices.
The SEC also wanted to know how much of Facebook’s $1 billion price for the photo-sharing app Instagram would be in stock rather than cash. The answer: $300 million in cash plus about 23 million shares. Based on facebook’s current stock price, the deal is now worth about $960 million.
Regulators also wanted to know about Zuckerberg’s ability to designate a successor given that the facebook co-founder has more than half of the company’s voting rights. The answer?
Zuckerberg has no power to decide who will be the next CEO or get his voting rights when he dies. However - like all other shareholders - he is able to designate people who will receive his own stock in the event of his demise.