The world’s biggest social networking site has suffered controversy ever since its initial public offering (IPO) on stock exchange Nasdaq last year, after which its price fell steeply and has failed to reclaim the greater than $100bn valuation at which the deal was originally priced.
The deal also ran into problems after Nasdaq had technical problems on the first day of the flotation and some of the underwriting banks conducting the IPO were fined for revealing information about the group’s revenue declines to selected clients ahead of the flotation.
Yet the corporate backers of the IPO deserve recognition for securing shares in the company before it had become clear how valuable the company would become, and possibly even helping it secure some of its stellar success.
The company equally deserves celebrating for transforming from a Harvard University dorm-room start-up to one of the biggest technology companies globally by market capitalisation in only eight years, with more than a billion users. It is, therefore, the Global Corporate Venturing IPO of the Year.
An analysis of the performance of the corporate investor in Facebook, shows the corporate venturing backers picked some very strong investments.
US-based software company Microsoft, which invested $240m in Facebook for its stake in 2007, effectively recouped its investment at IPO by selling 6.6 million shares at the $38 per share valuation.
This left Microsoft with 26.2 million shares after the flotation, valued at approximately $700m based on the trading price at press time.
Similarly DST Global, which is corporate-backed by Naspers and Tencent, seems to have achieved a good return after becoming a big shareholder in Facebook.
DST Global sold 45.6 million shares at flotation, worth $1.7bn. It retained 5 million A shares and 80.6 million B shares.
DST Global reportedly initially backed Facebook in 2009 with $200m at a $10bn valuation, while later that year it also bought $100m of stock from employees in a prescient deal at a moment when valuations were depressed by the fall-out from the financial crisis. It subsequently helped the company raise $1.5bn at a $50bn valuation in 2011, along with US bank Goldman Sachs.
Seemingly the biggest corporate winner in terms of multiple realised from investment was advertising company Interpublic, with a reported 0.4% holding.
It subsequently sold half the holding for $133m to an undisclosed buyer, valuing Facebook at $65bn, according to news provider Financial Times (FT). Interpublic paid less than $5m for the total holding in 2006, according to the FT.
The “strategic relationship” with Facebook enabled Interpublic “to fast-track the growth of our social media offerings”, Interpublic chairman Michael Roth said.
He added: “Facebook has since become a part of daily life for hundreds of millions of people around the world. Its ubiquity has meant the strategic value of our initial investment has moderated, while the financial value of that stake appreciated significantly. As a result, when an attractive opportunity to divest a portion of our position recently presented itself, we decided it made sense to do so.”
As ever with a hot stock, some who dived into Facebook at the wrong time got burnt, but much of the corporate world secured shares in the social network at the right time.
Doubtless many careers have thrived from this success, even if the flotation has been a difficult event for both the company, its Wall Street promoters, and some of its public market backers.
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