When the markets open on Monday, Facebook will be a member of the Standard & Poor’s 500-stock index.
In advance of that momentous event in the young company’s history, the social networking site is offering 70 million more shares to the public.
Facebook announced the secondary offering, the first since it went public last year, in a filing with the Securities and Exchange Commission on Thursday.
The new shares will primarily be offered to index funds that track the S.&P. 500 and may be required to purchase Facebook stock as a result of its inclusion in the index. A price for the offering will be set at the close of trading on Friday, and shares will be distributed shortly thereafter.
Based on the current price of around $55.50, the offering would raise about $3.8 billion. However, the shares are likely to be priced slightly below Friday’s closing price to reflect the slight dilution that will result from the offering, according to people with knowledge of the process.
The company itself will offer 27 million Class A shares, proceeds of which will be used for working capital. The company said it had no specific plans for the extra cash, but hinted that it could be used to fund future deals. Facebook has been an aggressive acquirer of smaller rivals, and had its $3 billion offer for Snapchat rebuffed earlier this year.
Facebook has two classes of stock: Its Class A shares are commonly traded, while its more closely held Class B shares hold the majority of voting rights.
Facebook’s co-founder and chief executive, Mark Zuckerberg, will exercise stock options to purchase 60 million Class B shares. He will sell 41.35 million of those as Class A, using most of the proceeds to pay taxes connected to the exercise of his options.
That will only slightly loosen Mr. Zuckerberg’s control on the company. He will still control more than 60 percent of the voting rights.
The filing also said that Mr. Zuckerberg intended to make a charitable gift of 18 million shares, or about $1 billion, this month. According to people with knowledge of Mr. Zuckerberg’s plans, he will donate those shares to the Silicon Valley Community Foundation, a nonprofit organization that he has previously supported.
Marc Andreessen, a Facebook board member and a co-founder of the prominent venture capital firm Andreessen Horowitz, is also selling 1.65 million shares as part of the offering.
Facebook shares were down 2 percent in midday trading on Thursday, but have jumped more than 17 percent in the last month, thanks in part to last week’s news that it would be joining the S.&P. 500.
Such offerings are relatively common when companies join the S.&P. 500, which tracks many of the most influential companies in the country.
Google offered 5.3 million shares when it was added to the index in 2006. More recently, General Motors offered shares this year as it rejoined the S.&P. 500 after its bankruptcy, and the chemical company LyondellBasell did the same last year.
JPMorgan Chase was the lead underwriter for the Facebook offering. Morgan Stanley, which led Facebook’s botched initial public offering, was also a bookrunner, along with Bank of America and Barclays.
By David Gelles
Sourced from The New York Times
