What Facebook Really Paid for Instagram

FB's latest 10-Q says it was actually about half the original $1 billion

By Tom Taulli, InvestorPlace Writer & IPO Playbook Editor


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.

Article printed from InvestorPlace Media, https://investorplace.com/ipo-playbook/what-facebook-really-paid-for-instagram/.

©2018 InvestorPlace Media, LLC