Facebook's Mark Zuckerberg is giving up a huge chunk of his personal stake in the company — more than 41 million shares — as part of a new offering by the social network that's worth an estimated $3.9 billion.
The secondary offering of stock, which includes about 70 million shares in total, comes as the company prepares to join the Standard & Poor's 500 index. After a premarket stock dip of more than 4 percent, its stock recovered somewhat and was down less than 2 percent in late morning trading on Thursday, The Associated Press reported.
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The Menlo Park, Calif., company said Thursday 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 on Friday after markets close. The index is a list of companies that have a market capitalization over $4 billion and is meant to be a snapshot of the U.S. economy.
At Wednesday's closing price of $55.57 per share, that would put the total value of the offering, not counting expenses, at about $3.89 billion. Zuckerberg's offering of 41.3 million shares would generate about $2.3 billion based on Wednesday's close, not counting expenses. Facebook itself threw in some 27 million shares and board member Marc Andreessen contributed the other 1.6 million, for a total of about 70 million.
The company said 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's also using part of it for charitable contributions.
It's Zuckerberg's decision to sell shares that likely led to Facebook's stock price decline.
That said, Standard & Poor's equity analyst Scott Kessler noted that 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," 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 Zuckerberg control over nearly 63 percent of the voting power of the company's outstanding stock, according to a Securities and Exchange Commission filing.
Facebook Inc. 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 percent more than it had at the end of September.
Facebook's shares slid 98 cents, or 1.8 percent, to $54.59 in late morning trading on Thursday. That's up about 44 percent from Facebook's $38 IPO price and down 2.3 percent from the all-time high of $55.89 that it hit on Wednesday.
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