Tuesday, November 21, 2017
News Roundup

Facebook's public offering expected to mint more billionaires, millionaires

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SAN FRANCISCO — In 2005, a Facebook executive hired artist David Choe to paint murals on the walls of the company's first offices in Palo Alto, Calif. For his efforts, Choe was offered a choice: cash in the "thousands of dollars," according to several people who know Choe, or stock then worth about the same.

Choe, who has said that at the time that he thought the idea of Facebook was "ridiculous and pointless," nevertheless took the stock.

On Wednesday, Facebook's announcement that it would go public at a valuation of $100 billion, put a bottom line on Choe's choice. His stock will be worth roughly $200 million.

Choe, who once led a rough life including run-ins with the law, is wealthy even without the Facebook offering. Now a very successful artist with gallery shows and pieces exhibited in major museums, Choe declined requests to be interviewed for this story; he said he wanted to maintain his privacy. He has, however, published an obscenity-strewn book of his art, David Choe, which includes images of the multimillion-dollar murals at Facebook.

Choe's story is just one example of how Facebook's public offering will mint a lot of billionaires and millionaires.

Some are well known, like Mark Zuckerberg, the company's co-founder, but many others are not household names. Zuckerberg, 27, has 533.8 million shares, worth $28.4 billion based on a company valuation of $100 billion. He owns 28.4 percent of the company outright and he controls 57 percent of the voting rights.

Facebook's first outside investor, Peter Thiel, the billionaire contrarian, led a $500,000 investment in Facebook in late 2004. He has 44.7 million shares that could be worth more than $2 billion. Sheryl Sandberg, the company's chief operating officer, holds 1.9 million shares, about 0.1 percent of the company. But she may ultimately collect 38.1 million additional shares, according to the filing, making her one of the richest in a tiny club of Silicon Valley women who are billionaires.

In contrast to the millionaires minted by Netscape's 1995 offering and Google's in 2004, two factors distinguish Facebook's turn. For one, the projected value of Facebook, up to $100 billion, is enormous — the largest on record for an Internet company, even several times greater than Google's offering in 2004. And unlike Google's public offering, a large chunk of the wealth tied to Facebook has already been realized, thanks to the thriving secondary market and an eager pool of global investors. Even if Facebook hits only the low end of expectations for its offering, it will still yield some of the greatest returns in the history of venture capital.

"Facebook will return insane amounts of money to the early stakeholders," said Alex Gould, a technology investor and instructor at the Stanford Institute for Economic Policy Research.

It's a big winners circle. DST Global, the investment firm led by the Russian billionaire Yuri Milner, owns roughly a 7 percent stake in the company. It bought the bulk of its shares from 2009 to 2011 at valuations of $10 billion to $50 billion.

According to the company's filing, Zuckerberg's father, a New York dentist, was awarded 2 million shares of stock "in satisfaction of funds provided for our initial working capital." Dustin Moskovitz, Zuckerberg's college roommate, a fellow Harvard dropout and company co-founder, holds 133.8 million shares.

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