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December 20, 2013

Facebook Throws a Like on Second Round of Stock Issue Plan

It wasn't so long ago that Facebook was going IPO, which itself launched something of a firestorm of criticism around how it was handled. But Facebook is looking to go back to the well and bring out an extra 70 million shares of stock, including some from a source that may not be so expected.

A Securities and Exchange Commission (SEC) filing shows that Facebook is looking for extra cash to be used as “working capital and other general corporate purposes,” and that the majority of shares—41.4 million—will come directly from Mark Zuckerberg, raising over $2 billion for the company's co-founder. Some of the rest will come from sales from other Facebook investors like Marc Andressen, but some of it will be outright new issues from Facebook itself.

However, Zuckerberg isn't looking to divest his share of Facebook entirely—indeed, that might have been a red flag on par with most anything seen—as Zuckerberg is reportedly set to use an option that allows him to buy 60 million shares of class B common stock, which holds more voting rights than the class A common stock he holds. The profit from the sale of the class A shares, according to Facebook, is set to offset taxes related to the purchase of the class B shares. Overall, however, Zuckerberg's voting stake will fall slightly from 65.2 percent to 62.8 percent, still more than majority enough. With Facebook set to hit the S&P 500 index, it was suggested that this was a good time to offer up more stock, and prices have seen a lot of volatility, at one point reaching nearly $54 a share.

It's clear, however, that Facebook is likely to need some working capital and some breathing room. There have been suggestions that Facebook may be losing the valuable youth market, and is facing increasing competition from other social networks. Things like Snapchat—who actually refused a buyout offer from Facebook in the amount of $3 billion at last report—are posing a serious threat, and teen users seem to be moving on. But in turn, Facebook has already been seen responding to this by beefing up its mobile loadout, and stepping up new items like video advertising.

Facebook doesn't seem to be making the mistake that some larger companies have made, and is looking to keep its product line fresh and bringing out new stuff on a regular basis. Not all of it may work, of course, but finding out what doesn't work is almost as important as finding out what does. Still, experimentation and development is going to cost money, and that's something Facebook likely won't be lacking thanks to this newest round of stock selling.

Will there be interest? Well, that remains to be seen. A company going into the S&P index isn't exactly a bad move, and Facebook isn't exactly gathering moss. While only time will tell if its new products pan out, not to mention just how much interest there will be around a new Facebook stock launch, the fact that Facebook is ready to make the changes necessary to be a thriving company is certainly a point in its favor. 

Edited by Cassandra Tucker

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