Facebook is currently seeking to increase its $2.5 billion credit line ahead of the company’s initial public offering (IPO).
While the company declined to comment when asked about the increased by Reuters it’s believed the money is needed to pay taxes the company will owe for employee stock awards. Last month when announcing it’s plans to go public Facebook executives said they planed to take the unusual step of cover taxes on restricted stock.
The full tax bill Facebook will be forced to pay won’t be fully known until shares are priced on the open market. The higher the Facebook share price the higher the company will be forced to pay. The company’s tax bill is expected to be in the billions of dollars range.
According to ReadWriteWeb:
“Companies often move to extend credit lines when they’re financially sound, following a principle of “get it when you can, not when you need it.” Facebook, with the huge cash infusion of its IPO just around the corner, is in a strong position.”
The increased credit line will come with additional interest payments for the company which in turn could leave less room for acquisitions and other ventures, although with an expected valuation of close to $100 billion a lack of on-hand cash might not be a problem for the worlds largest social network as it nears 1 billion active users.