Facebook shares fell as much as 2.7% after the company announced to sell 70 million shares of its Class A common stock as part of a whopping $3.9 billion offering. This public offering include 27M shares by Facebook, 41.35M shares by CEO Mark Zuckerberg and 1.6 million from board member Marc Andreessen.
Facebook wants to clear its taxes. And this is the reason that the giant social networking site today announced an underwritten registered public offering of 70 million shares of its Class A common stock. In these 70 million shares, a total of 27 million shares are being offered by Facebook itself, and a total of 43 shares are being offered by certain selling stockholders, including 41.35 million shares worth about $2.3 billion offered by CEO Mark Zuckerberg.
The remaining 1.6 million shares are actually offered by a board member Marc Andreessen. This will be total offering of worth about $3.9 billion. This offering amount is based on the Facebook’s closing price yesterday. Before this announcement, Facebook shares were already dropped down by 4% at $53.54. Bloomberg reports that Facebook shares fell as much as 2.7 percent after the announcement.
This public offering of Menlo Park, California-based Facebook shares is being announced just a day before Facebook joins the S&P 500 Index. Standard & Poor's, a division of McGraw-Hill Financial Inc. (S&P), has already announced to include Facebook's Class A common stock in the S&P 500 Index, which is comprised of 500 common stocks that S&P selects, effective as of the close of trading on December 20, 2013.
Todd Lowenstein, a portfolio manager with Highmark Capital, said, “It’s never a positive sign when insiders are dumping massive quantities of stock. The company (Facebook) is now being added to the S&P 500 Index so there will be large demand for the shares from index buying and index hugging money managers. So it seems this will be absorbed without much disruption.”
Facebook is expecting that CEO Mark Zuckerberg will use the majority of the net proceeds of the sale of shares in the offering to satisfy taxes.
The joint book runners of the offering are J.P. Morgan, BofA Merrill Lynch, Morgan Stanley and Barclays. And BNP Paribas, Citigroup, RBC Capital Markets, Credit Suisse, HSBC, Standard Chartered and Piper Jaffray are serving as co-managers for the offering.