Whilst filing its IPO paperwork with the Securities and Exchange Commission this week Facebook provided a glimpse into the inner workings of one of the world’s most closely-watched companies. These details were previously unknown as the firm was a private company.
It portrays a business that brings in a majority of its money from selling display ads and banners which are targeted to a users’ behaviour and interests, which is gleamed from the users’ activities, these connections and activities among its stated 845 million members are an advertiser’s dream.
Amongst the details in the filing are:
- 250 million photos a day are uploaded by its users.
- Users signal that they “like” items that have been posted by friends 2.7 billion times a day.
- Last year the company had $1 billion in profit.
Also included in the filing are the base salaries for all the top executives, so here it is:
- Mark Zuckerberg, CEO was paid a base salary of $483,333 in 2011 with an additional $220,500 bonus for the first half of 2011. On top of this was payments for travel and security totalling $783,529, which means he received $1,487,362 overall for 2011, this does not include his large stake in the company. However, effective from January 01 2013 he will reduce his annual base salary to just $1.
- Sheryl Sandberg, COO received a salary and bonus totalling $381,966 in 2011 and was granted about £30 million in stock awards.
- David Ebersman, CFO received the same in salary and bonus of $381,966 in 2011, his total compensation with stock comes to $18.6 million.
- Mike Schroepfer, VP of Engineering received $333,833 in salary and bonus in 2011, combine this with his stock awards to total $24.7 million for last year.
The document also reveals that if Sheryl Sandberg or Theodore Ullyot (VP General Counsel & Secretary) are ever terminated without cause they will be able to vest their stock immediately.
Losing Sandberg or Zuckerberg is also listed as a risk for the company – ‘The loss of key personnel, including members of management as well as key engineering product development, marketing and sales personnel, could disrupt our operations and have an adverse effect on our business,’ the filing stated.
From the details in the filing we could ask why are Facebook going to floatation, the company is very different from your average Silicon Valley beginner as it already has a huge and devoted audience combined with a cash flow of $470 million in 2011. What are its plans for the extra $5bn it anticipates raising from an IPO – from the filing it admits that its cash flow and credit ‘will be sufficient to meet our operational needs for the foreseeable future.’ Well it intends to use the cash buying US government bonds and savings accounts and maybe use some to pay tax due on converting into shares the ‘restricted stock units’ it gave to its 3,200 staff. Yes, that is correct by going public the proceeds will pay the tax obligation triggered by this process – catch 22!
However Zuckerberg doesn’t wish to lose his grip on the company by allowing the ordinary shareholders voting rights. As well as holding 28% of Facebook’s privileged B class shares Zuckerberg wields proxy control of a further 30% of Facebook voting shares. Zuckerberg also has the right to appoint directors, ultimately maintaining control of the management and affairs of the company. He has even granted himself the ability to pass control to his chosen successor when he dies.
Other than meeting the US regulations for a private company to go public when it gains more than 500 investors, the motivation behind Facebook’s floatation is clearly to gratify its venture capital investors and employees.
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