Private Company Valuations: Facebook, Inc.

Posted By Justin Byers, Lead Business Intelligence Analyst on July 24, 2008

There has been a lot of talk lately about Facebook, Inc. With everything that has been written in blogs, posted on message boards, and talked about on the news, we decided to take a look at the regulatory filings to see if we could shed some light on the financing and valuation discussions that have been so vast and full of questions. Below are the results of our analysis of particular regulatory documents filed by Facebook, Inc.

• On July 29, 2004 , TheFacebook, Inc. filed its “Certificate of Incorporation” that authorized 10,000,000 shares of capital stock, all of which would be designated “Common Stock”. Around this same time is when TheFacebook, Inc. received its first round of financing of $500,000 from Peter Thiel.

• On February 11, 2005, the company filed its “First Amended and Restated Certificate of Incorporation”. The Certificate of Incorporation was amended and restated to increase the number of authorized “Common Stock” shares to 19,000,000.

• On February 17, 2005 there was a filing for 2,400,000 “Options or rights to purchase Common Stock” at a price per share of $0.009.

• On April 18, 2005, the company filed its “Second Amended and Restated Certificate of Incorporation”. The results of this filing were:

  • Increase in the number of authorized “Common Stock” shares to 20,890,000,

  • Authorized a second class of stock to be designated as “Preferred Stock”. The first series of “Preferred Stock” was designated as “Series A Preferred Stock” and consisted of 1,890,000 authorized shares. The deal terms of the “Series A Preferred Stock” were as listed below:

• On April 29, 2005, the company filed its “Third Amended and Restated Certificate of Incorporation”. The results of this filing were:

  • Increase the number of authorized “Common Stock” shares to 30,000,000

  • Decrease the authorized number of “Series A Preferred Stock” shares to 1,684,342.

  • A second series of preferred stock was created and designated as the “Series B Preferred Stock” and it consisted of 2,833,000 authorized shares.

  • Investors in this round included Accel Partners and Peter Thiel

  • The deal terms of the “Series B Preferred Stock” were as listed below:

• In September 2005, the company named changed to Facebook, Inc.

• On February 2, 2006, there was a filing for 3,388,076 “Options or rights to purchase Common Stock” at a price per share of $0.78.

• On March 25, 2006, there was a filing for “Options to purchase 875,000 shares of common stock” at a price per share of $8.05.

• On April 18, 2006, the company filed its “Fourth Amended and Restated Certificate of Incorporation”. The results of this filing were:

  • Increase the number of authorized “Common Stock” shares to 51,200,000

  • Decreased the authorized number of “Series B Preferred Stock” shares to 2,825,400.

  • A third series of preferred stock was created and designated as the “Series C Preferred Stock” and it consisted of 1,197,100 authorized shares.

  • Investors in this round included Accel Partners, Peter Thiel, Greylock Partners, and Meritech Capital Partners

  • The deal terms of the “Series C Preferred Stock” were as listed below:

• On July, 28, 2006, the company filed its “Fifth Amended and Restated Certificate of Incorporation”. Upon the filing of this Amended and Restated Certificate of Incorporation, there was a 1 to 4 “stock split” of every share of the companies Common Stock and the Preferred Stock. The adjusted authorized share amounts and price amounts of each class and series were as follows:

  • The total number of shares of Common Stock authorized was adjusted to 204,800,000

  • The total number of shares of Series A Preferred stock authorized was adjusted to 6,737,368 and the Series A Preferred price per share was adjusted to $.0921.

  • The total number of shares of Series B Preferred stock authorized was adjusted to 11,301,600 and the Series B Preferred price per share was adjusted to $1.14005.

  • The total number of shares of Series C Preferred stock authorized was adjusted to 4,788,400 and the Series C Preferred price per share was adjusted to $5.743336.

• On August 14, 2007, there was a filing for “Options to purchase 2,820,789 shares of common stock” at a price per share of $6.61.

• On October 18, 2007, the company filed its “Sixth Amended and Restated Certificate of Incorporation”. Upon the filing of this Amended and Restated Certificate of Incorporation, there was another 1 to 4 “stock split” of every share of the companies Common Stock and the Preferred Stock. The adjusted authorized share amounts and price amounts of each class and series were as follows:

  • The total number of shares of Common Stock authorized was adjusted to 819,200,000

  • The total number of shares of Series A Preferred stock authorized was adjusted to 26,949,472 and the Series A Preferred price per share was adjusted to $.023025.

  • The total number of shares of Series B Preferred stock authorized was adjusted to 45,206,400 and the Series B Preferred price per share was adjusted to $.2850125.

  • The total number of shares of Series C Preferred stock authorized was adjusted to 19,153,600 and the Series C Preferred price per share was adjusted to $1.435834.

• Also on October 18, 2007, there was a filing for 1,240,500 "Options and Restricted Stock Awards to purchase Common Stock pursuant to the Issuer’s 2005 Stock Plan (the “Plan”)" at a price per share “calculation based on fair market value of $6.61 at time of board approval. Actual exercise price will be fair market value on the date of grant as provided in the Plan.” “These numbers do not reflect the proposed stock split.”

• On November 01, 2007, the company filed its “Seventh Amended and Restated Certificate of Incorporation”. The results of this filing were:

  • A fourth series of Preferred Stock was created and designated as the “Series D Preferred Stock” and it consisted of 13,490,808 authorized shares.

  • Investors in this round included Microsoft, Li Ka-shing, and the European Founders Fund (Samwer Family).

  • Just prior to the filing of this certificate, Microsoft stated that they would invest $240 MM for a 1.6% stake in the company, giving a valuation of $15,000,000,000, thus the reason the per share price of the preferred is raised to $37.06227.

  • The deal terms of the “Series D Preferred Stock” were as listed below:

• On February 14, 2008, the company filed an Amendment to the “Seventh Amended and Restated Certificate of Incorporation” that increased the authorized “Common Stock” shares to 825,945,406, and it also increased the number of “Series D Preferred Stock” shares to 20,236,214.

• On February 26, 2008 there was a filing for 5,878,264 "Options and Restricted Stock Awards to purchase Common Stock pursuant to the Issuer’s 2005 Stock Plan (the “Plan”)" at a price per share “calculation based on fair market value of $7.75 at time of board approval. Actual exercise price will be fair market value on the date of grant as provided in the Plan.”

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Comments

This is fascinating and a great presentation of the data. Thank you.
By Mike Fay on December 3, 2009

Due to the protected methodology of our valuation process, we cannot reveal too much of the calculation. I can say that we use certain publicly available regulatory filings for the calculation.
By J. Byers on July 25, 2008

How facebook net income record?
By bolu on July 24, 2008

Did they find any revenue numbers for Facebook? I know the valuation was driven by Facebook's number of users, but I am sure they also had some historial revenue numbers to back up these valuations
By Ana on July 24, 2008

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