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Facebook to Raise $150 Million to Buy Employee Shares

An estimated amount of 15 million shares

By Giorgiana Bursuc, Windows Editor

19th of May 2009, 05:36 GMT

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Facebook rumored to try raising $150 million to buy employee shares
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According to the latest news on the web, Facebook is attempting to purchase shares from many of its regular employees. The Palo Alto, CA-based company is known to reward valuable personnel with shares valued at less than a dollar each and now it is raising $150 million in capital to buy out these shares. There are already thousands of people who have been working for the company during the last several years and it is only understandable that some of them might want to take advantage of the money they have been saving.

Consequently, when these people have had the possibility to sell some of their shares for a private market value of $10 each, they will not refuse the investors. Apparently, this transaction will represent buying around 15 million shares, accounting for approximately $150 million total value. For the present, Facebook has chosen not to make any comments on this situation.

On the other hand, the purchase has not been completed yet. Still, it comes as another clue that large private organizations, such as Facebook, are striving to obtain 'liquidity' for their staff, especially since the IPO (Initial public offering) market remains difficult, mainly for unprofitable firms. Moreover, due to this shortcoming, the current investors of Facebook (namely Accel, Founders Fund, Greylock, and some other ones) have encountered difficulties when it came to raising the entire amount of money, so it has been reported that part of the transaction is supported by Asian investors.

It seems that speculation concerning Facebook raising capital emerged for the first time several months ago, but the reason behind this move was uncertain. Thus, there were voices who said that the company was in need for cash to pay for the high costs for storage and servers, which have increased lately since more and more people (around 200 million users, to be more precise) are sharing photos throughout the social networking site. Nonetheless, Facebook representatives have denied such reasons, and now it seems that indeed there were other motives behind the transaction.

Apparently, the company officials refused to comment on the current fundraising or the amount it aims to obtain. A Facebook spokesman, Larry Yu, has declared that the company indeed has a program that allows employees to sell as much as 20 percent of their shares, but other details have not been revealed. His argument was, “Facebook is a private company, so as a matter of policy, we don’t typically share details about our financial plans or comment on rumor and speculation.”

Currently, the project has been delayed until October, but it seems it will be continued after the latest funding is completed. This is not the first time Facebook starts to raise capital – previously, it obtained more than $400 million, as well as getting into a debt for a lease line to purchase new servers, which accounted up to $100 million. So we just have to wait and see the outcome of this new attempt and the real reasons behind it.

TAGS:

Facebook | capital raising | IPO | share purchase
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