Don’t worry – Mark Zuckerberg still likes Facebook stock. He is selling 41m shares in a secondary offering that will raise about $2bn; But most of the cash will go to pay tax on options he is exercising to buy 60m more shares. He will easily keep a majority of the voting interest (62 per cent) in the company he founded.
More interestingly, Facebook itself is raising $1.5bn by selling new shares to mutual funds to coincide with its inclusion in the S&P 500 index. Slick timing for a stock sale as its shares have doubled this year on the basis of revenue growth that has shocked and delighted Wall Street. At some point, perhaps even next year, the $120bn company’s growth will let up, but when this happens, Facebook’s amazing profitability will remain.
The rally this year is about accelerating revenue growth. In quarters one through three, ad revenues jumped 43, 61 and 66 per cent, respectively. The trick has been to keep ad dollars flowing without alienating users. The company knows its users can very easily switch to Twitter, Instagram (owned by Facebook) or Snapchat. In October, management said it would not flood its news feeds with more ads. Instead, it turns to higher impact ad formats, such as video, which it is now debuting.