Mark Zuckerberg, the founder of Facebook. According to a foreign media report on Monday, based on the trading price of the U.S. secondary market trading platform SharePost last week, the valuation of Facebook reached $100.14 billion. However, when Facebook completes its initial public offering (IPO) in the coming months, the value of Mark Zuckerberg's shares may be less than $21 billion.
The IPO prospectus of Facebook shows that the company plans to issue more than 500 million Class B common stocks in the form of exercising stock options and restricted stocks, but the prospectus does not include these shares in the total number of shares, so the data inferring that Zuckerberg holds 28.4% of the equity is incomplete.
Sam Hamadeh, head of research company PrivCo, said that the shareholding ratio in the prospectus might be misleading, attributing shares not belonging to Zuckerberg under his name.
During the IPO, Zuckerberg may sell about $1.75 billion worth of Facebook shares to pay for the taxes generated by exercising the option to purchase 120 million shares. This transaction will dilute Zuckerberg's shareholding ratio from about 28.4% to around 21%. If Facebook's valuation remains around $100 billion, then the value of Zuckerberg's personal shares will be about $21 billion, less than the $28.4 billion inferred from the prospectus.
Facebook spokesman Jonathan Thaw refused to comment.
The prospectus submitted last month showed that Facebook intended to issue 138.5 million Class B shares through the exercise of the company's 2005 stock option plan. The weighted average exercise price of these shares was approximately 83 cents.
Facebook will also issue 380.7 million restricted shares, plus the already issued 1.88 billion Class A and Class B shares, bringing the total number of issued shares after the listing to nearly 2.4 billion. Based on a market capitalization of $100 billion, each share will be worth about $41.75.
Zuckerberg's stock option exercise price is 6 cents. If he buys all 120 million shares at this price, he will gain $5 billion. Calculated at a tax rate of 35%, Zuckerberg needs to pay $1.75 billion in personal income tax. So he needs to sell 42 million shares for taxation purposes, leaving his final total holdings at 491.8 million shares.
Hamadeh said that if Zuckerberg's held shares are multiplied by the expected issue price, his wealth is far from $28 billion.
However, Facebook's stock price is very likely to soar on the first trading day. For every $1 increase in the stock price, Zuckerberg's wealth will increase by $500 million. If the stock price rises by 35%, his held shares will be worth $28 billion.