When Facebook (NASDAQ:FB) announced its acquisition of Instagram back in April, the price tag was roughly $1 billion. At the time, the mobile-sharing site had about 27 million users, 13 employees and zero revenues.
Well, since then, the growth has continued at a torrid rate. It now has over 100 million users, and yes, Facebook is thinking about ways to wring out revenues.
But there’s something else: The purchase price for the deal is actually much less. According to Venturebeat — which went through Facebook’s latest 10-Q — the valuation of the transaction is about $521 million.
The reason for the decline? A big portion of the purchase price was in the form of stock. In fact, the valuation could be $715 because there was an issuance of shares that have a vesting requirement.
Thus, even with the stock’s lower price, the deal is still far from cheap.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook.“ Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.
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