People have been saying “billion dollar deal” because it makes great headlines, but how much did Facebook’s acquisition of Instagram really set the social media giant back?
About $715 million in cash and stock. So, still more money than you or I will likely see in our lifetimes.
Facebook detailed the final purchase information today in its 10-Q. On the books, Facebook’s purchase of Instagram sits at $521 million. That figure comes from the $300 million in cash that was promised by Facebook in addition to the price of 12 million vested shares of Class B common stock. That stock goes to “non-employee stockholders,” (read: investors) instead of to Instagram’s staff.
However, Facebook issued 11 million un-vested shares to Instagram employees, including its founders. Those shares vest over three years and have an aggregate fair value of $194 million. Adding up all those numbers puts the final acquisition price tag at $715 million.
The deal fell short of the projected $1 billion mark simply because Facebook’s stock price has declined since the deal was originally drafted. The original deal was $300 million in cash, and 22,999,412 shares. The initial projection was pre-IPO, and now that we’re in post-IPO, falling Facebook stock lowered the final price of the deal.
Still, we can’t imagine that Instagram’s founders, staff, and investors are wailing over Facebook’s final offering of $715 million. The hit mostly affects the investors who threw $50 million at Instagram: They simply won’t be seeing their investment double like they may have hoped.