Russian investment group Digital Sky Technologies has placed a tender offer to purchase up to $100 million of common stock from current and former Facebook employees, we’ve confirmed from a source close to the deal. Employees who would like to accept the offer must accept the terms within 20 business days from today. The offer is for $14.77 per share, valuing the company at $6.5 billion.
Facebook has confirmed the transaction, and sent the following statement from CEO Mark Zuckerberg: “While individuals must make their own decisions about participating in this program, I’m pleased that the price DST is offering is much greater than the price originally considered last fall. This is recognition of Facebook’s growth and progress towards making the world more open and connected.”
This comes just a little over a month after DST invested $200 million in Facebook, purchasing preferred stock that valued the company at $10 billion.
If the offer is fully accepted DST will purchase approximately an additional 1.54% of the fully diluted stock of Facebook. With the two investments combined, DST will own approximately 3.5% of Facebook in total.
The difference in valuation ($10 billion in May v. $6.5 billion today) is not a sign of a lower valuation. The stock DST is acquiring in this tender offer is pure common stock without any special rights or privileges. The May investment was for preferred stock, which includes various voting and liquidity provisions that makes it more valuable. Generally in any liquidity event (an acquisition or IPO), preferred stock will convert into common stock on a 1:1 basis.
This isn’t a complete surprise. In an interview I did with Facebook CEO Mark Zuckerberg and DST Founder and CEO Yuri Milner, both said DST planned to offer to purchase employee stock.
Here’s that interview again in case you missed it: