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Facebook Sets Up Dual-Class Stock Structure But Not Going Public

Posted on: Wednesday, 25 November 2009, 11:35 CST

Facebook said on Tuesday it introduced a dual-class stock structure to give founder Mark Zuckerberg and other existing shareholders control over the company, but it has no plans to go public at the time, AFP reported.

The Palo Alto, California-based company said in a statement that it is a private company that does not typically share details on stock-related matters.

However, the company introduced a “dual-class stock structure because existing shareholders wanted to maintain control over voting on certain issues” to help ensure that it can continue to focus on the “long-term to build a great business,” the statement said.

The development of the new stock structure did not mean it was preparing an initial public offering.

The statement continued: "This revision to the stock structure should not be construed as a signal the company is planning to go public. Facebook has no plans to go public at this time."

Facebook is converting the shares of all current shareholders into Class B stock, which carries 10 times the voting power of Class A stock, according to The Wall Street Journal.

But the Journal reported that Zuckerberg, the company's largest shareholder, has said that it plans to go public eventually.

In July, a Russian Internet company offered to purchase 100 million dollars worth of stock from Facebook employees in a deal that valued the company at $6.5 billion.

Microsoft bought a 1.6 percent stake in Facebook in 2007 for $240 million, valuing the social network on paper at $15 billion.

As of September, Facebook had over 300 million members and it has raised more than $600 million from investors since it was founded more than five years ago.

Some analysts say Facebook has in some ways been modeling itself on Google, which long ago went to a dual-class structure.

Ben Schachter of Broadpoint AmTech said it was the exact same thing Google did.

“The structure is a way to protect longer term interests against short-term pressures,” he said. “Without a dual-class structure, a majority of shareholders could force business decisions for short-term gains at the expense of the long-term success sought by the company's founders.”

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Source: RedOrbit Staff & Wire Reports

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