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Facebook Creating Dual-class Stock Structure

  • Posted: Friday, November 27, 2009
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  • Author: pradhana
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  • Filed under: Facebook

By Jason Ankeny

Social networking behemoth Facebook said it will create a dual-class stock structure and convert its current shares into so-called Class B shares, but maintains it has no plans to go public. According to The New York Times, the Class B shares will have 10 votes each on matters of corporate governance--Class A shares, which would be sold in an initial public offering, would carry one vote each.

"We did introduce a dual-class stock structure because existing shareholders wanted to maintain control over voting on certain issues to help ensure the company can continue to focus on the long term to build a great business," Facebook spokesman Larry Yu said in a statement emailed to the NYT. "This revision to the stock structure should not be construed as a signal the company is planning to go public."

In the event Facebook does mount an IPO, founder and CEO Mark Zuckerberg would retain control over the firm and its board of directors--a dual-class structure "is another mechanism to exert complete control and it's tantamount to almost like a preferred security," said Scott Sweet, senior managing partner at advisory firm IPO Boutique.

Earlier this year, Facebook allowed employees to sell a portion of their stock to Russian venture capital firm Digital Sky Technologies, which added $100 million in shares to its previous $200 million ownership stake. Facebook employees have also sold their shares via secondary exchanges like SecondMarket and SharesPost. [FierceMobileContent]

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