Few IPOs have garnered as much attention as social media giant Facebook’s public offering on May 18, 2012. It was the biggest IPO in internet history, easily topping Google’s IPO eight years earlier. Let’s take a closer look at the IPO itself, as well as the payoffs to some of Facebook’s early investors.
Begin by navigating to the SEC EDGAR Web site, which provides access to company filings: https://www.sec.gov/edgar.shtml. Choose “Company Filings Search” and pick search by “Company Name”. Enter “Facebook” and then search for its IPO prospectus, which was filed on the date of the IPO (May 18, 2012) and is listed as filing “424B4” (this acronym derives from the rule number requiring the firm to file a prospectus, Rule 424(b)(4)). From the prospectus, calculate the following information:
Facebook had only one angel investor, Peter A. Thiel (the founder of PayPal). Mr.Thiel invested more than once in Facebook, both as an angel and, in later rounds, on behalf of investors in his venture capital fund, Founders Fund. As an angel, Mr.Thiel invested $500,000 in September 2004. Assuming that all the shares he received in the angel round were registered under the name Rivendell One LLC, use the information in the prospectus (again, in the “Principal and Selling Stockholders” section, see the footnote (16) attached to Peter A. Thiel ) to calculate:
A) The per share price he paid as an angel.
B)The annualized return he made on his investment up to the IPO point (again, using the IPO offer price as selling price). Note that the holding period return is about 92 months in this scenario.
C)The amount of money Mr.Thiel would have received from the IPO, if all shares he held under the Rivendell One LLC were sold at the IPO price.