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Facebook puts dual-class stock structure in place
Company stresses that no IPO is planned; Following in Google's footsteps
By John Letzing, MarketWatch
Last Update: 4:26 PM ET Nov 24, 2009
SAN FRANCISCO (MarketWatch) -- Closely held Facebook Inc. is adopting a dual-class stock structure, a move that could lend insiders including Chief Executive Mark Zuckerberg greater control of the social-networking service following a sale of its stock on the public markets.
However, the Palo Alto, Calif.-based company stressed that it has no immediate plans for an initial public offering. "We did introduce a dual-class stock structure because existing shareholders wanted to maintain control over voting on certain issues," Facebook spokesman Larry Yu said in a statement.
"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," he added.
News of the adoption of a dual-class stock structure was first reported by The Wall Street Journal earlier Tuesday.
Under the terms of the dual-class structure, existing shareholders would have their stock converted into Class B shares, which carry more voting power than Class A shares. Those Class B shares would be converted to Class A shares upon their sale on the public markets.
Google Inc. GOOG adopted a similar, dual-class structure prior to its IPO in 2004, and distributed Class B shares with enhanced voting power to co-founders Sergey Brin and Larry Page, as well as Chief Executive Eric Schmidt.
Facebook is widely expected to undertake its own IPO, a possibility strongly hinted at by Zuckerberg. In September, Zuckerberg announced that Facebook had topped 300 million users worldwide and was "cash-flow positive."
The company received an investment from Russian firm Digital Sky Technologies in May that gave it an implied value of $10 billion.
Other investors include Microsoft Corp. MSFT, which paid $240 million for a 1.6% stake in 2007, and venture-capital firms including Accel Partners and Greylock Partners.
Facebook's board of directors now includes Zuckerberg, Netscape founder Marc Andreessen, Accel's Jim Breyer, Washington Post Co. Chief Executive Don Graham and Founders Fund managing partner Peter Thiel. Greylock's David Sze and Meritech Capital Partners managing director Paul Madera serve as board observers.
In June, Facebook hired former Genentech Inc. Chief Financial Officer David Ebersman as its new finance chief, a move widely seen as an upgrade to an executive well versed in overseeing the finances at a public company.
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