Facebook CEO Mark Zuckerberg left his board out of the loop as he personally hammered out a $1bn deal with Instagram for its colour-changing photo software in three days of negotiations in his house in Palo Alto, culminating in the deal on Sunday 8 April, a report in the Wall Street Journal claims. Citing a person familiar with …
I think that there's a couple of things...
1) By not telling the board, he's opened himself and the company up to a shareholder lawsuit.
2) Its not an all cash deal. (How much is based on Facebook Stock?)
Last time I heard Zuck still owns >60% of the stock. Majority owner and given a huge portion of the deal is based on Facebook stock which may be worthless after IPO...
They have a $100bn valuation so this is a 1% bet and opportunity to get into a new market.
I believe we are still in pre IPO so the 100 billion dollar valuation is noise.
But still the other 40-50% is owned by investors and Zuckerburg has a fiduciary responsibility especially in light of his desire to cash out. Why else is he taking the company public?
Anyone purchasing shares in FB after this stunt probably bought shares in groupon.
Ok - odd question (never used Instagram or whatever it's called but....) who owns the rights to the photos? I vaguely remember Pintrest own all the photos on their services (it's in the T&Cs, I can go find a posting on it from somewhere....)
Did Zuckerface just blow $1b on all the pictures?
Not one of you have understood why he did this, for 1bn he has got direct access into an application that integrates fully into his competitors social networks, duh??? it was worth every penny.
Billion is nothing to z man. If a government said it was going to populate a DB on every detail of everyone on earth we would all go mad.
Z man and you do it for them. Nobody has any privacy and you get to click like on a cute dog pic .
Its not his money so what does he care.
There's honestly no reason to buy them at all. You could build a competing feature for a few tens of thousands that would be available on MORE platform than Instagram exists on, and do a better job.
I'd say 4-6 months 3-4 people can create that product. There is nothing sophisticated or hard. No real time processing on the servers, image filtering is well studied too.
I still maintain it's money laundering.
It's not his money.
The scummier side of investment banking like venture capital and hedge funds do not care about hot air bubbles like Facebook because in the end it is the taxpayer that gets soaked.
If he didn't do this as a shift move to throw some money at a friend he's an absoute moron. If it were about buying out his friend's company then he'd just be acting like a prick towards the other board members.
Instagram surely can't even have any patents given they're doing something photoshop has done for ages. Buying a userbase is stupid given it could disappear over night since instragram is just a fad at best.
Zuckerberg was just a dangerous lunatic all along.
forgive me if i say i told you so HA.
Never mind the 1 billion. I am curious about this ... "a $50m round of venture funding"
Who the hell would fund this "business plan" in the first place. Say, guys, I have this bridge and a business plan for you to look at down in Devon.
A Billion Dollars
Between the worthlessness of the US dollar and the eventual worthlessness of FaceBook stock, I'd say everybody got what they deserved.
Didn't we already have this bubble?
What would it cost to hire more developers and develop an service like Instagram's? Ibet a lot less than a billion.
@lee; did you bother to do ANY research before ranting like a child who ate too many paint chips this week? Faceboook had $1.6 BILLION in revenue the first half of 2011.
I'd suggest before spouting off like a half-wit, you do at least a*LITTLE* research.
Was it such a silly business decision after all?
"Mr. Andreessen, whose venture-capital firm was the second to invest in Instagram, cutting a $250,000 check before the service launched, was surprised when Mr. Systrom walked into the room about an hour into his meeting with Mr. Zuckerberg, the people said."
I'm curious about the Facebook board's Mr Andreessen. He's apparently invested $250,000 into Instagram prior to the sale, so how much does he stand to gain now? I see that the sale is primarily Facebook stock, so wouldn't Mr Andreessen be winning quite a bit of his own stock? Stock that they're all hoping will be worth a metric fucktonne now?
Perhaps it's possible that Mr Andreessen knew a bit more about what was going on and the $1b price paid had the secondary goal of lining the Facebook board's own pockets.
Cheap at the price
If Leo Apotheker was still at HP, he would have paid 10.3 Billion for Instagram.
Oh hang on, that was what he did for Autonomy .
Judge for yourself - Instagram Example Photos
Here you go:
Would you pay 1 Billion for that tool?
Re: Judge for yourself - Instagram Example Photos
Sadly, the photos on that group aren’t that representative of Instagram – most of the stuff that seems to get posted these days is a damn sight worse… and don’t get me started on the ‘what’s popular now’ feed.
Being lucky and being intelligent are two diffrent things, luck with FB, intelligent with Instagram.
i'll let people decide if Zuckerberg is lucky or intelligent but I will state he ain't both.
A future tag line?
It's my company, Bitch!
I had never even heard of Instagram until I saw the Apple lot whining about it appearing on Android.
If I had been one of the "Userbase" I'd probably stop using it based on the sickening greed displayed by the CEO when placing that an inflated value on my head.
Someone mentioned money laundering - that sort of fits, along with creating a buzz and cooking the books in time for the FB IPO "Look we now include Instagram which alone is worth $1bn!!!".
Two Lips from Hamster Jam
When this bubble bursts, how's about we follow the current trend for "retro" for the next one? I've got a couple of nice Tulips I got from B&Q at the weekend that I'd be prepared to let go for a couple of million each --> Tulpenmanie
I have never used Instagram, though I seem to recall it has a product icon that looked remarkably like an old Polaroid camera (I haven't re-checked this factoid). In fact, this likeness was IIRC the reason I even bothered to look closer at what the app did. I subsequently moved on as Instagram provides no utility of any use to me. I DID, however, look at Instagram because of "the Polaroid" thingy.
a) I wonder how many others were attracted by the Polaroid camera icon?
b) Is there a business model somewhere in using (or is that abusing) the image of a massively well known product to gain "eyeballs" at zero cost?
c) If the answer to (a) is "a zillion" and the answer to (b) is "Yes", then I have a great list of "images" we can poach to launch a product.
"£1bn of Facebook shares"
I would like to know how they counted out £1bn of Facebook shares. The shares are unlisted and can't be freely traded, so how many shares are worth £1bn? I remember Facebook was widely regarded as being "worth £15bn" at one point on the basis that Microsoft had bought about 5% for £750m. The maths may be correct, but there is absolutely no way Systrom can actually go out and buy goods and services worth £1bn. Even if Microsoft decides they want to buy another slice, and Systrom would like to sell his, they won't ask him. They'll get the shares from some shadowy Melmotte figure.
There is of course the upcoming IPO. But as above, it won't be Systrom's shares on offer, it'll be the private equity firms' and investment banks' shares. He may even be restricted from selling his shares all at once in order to keep the share price up. If Facebook becomes the next Google - i.e. has a successful IPO, the shares don't tank, are traded in sufficient volume that he can sell his "£1bn" without breaking the market, and all this goes on for long enough for him to outlast any dealing restrictions, he'll be rich. If any of those things does not come to pass, he may as well have been paid in Monopoly money.
Still, I bet he's enjoying himself as long as he doesn't think about it too much.
Re: "£1bn of Facebook shares"
Even though the shares are not on the open market, they do have a set value based on GAAP.
Or they could set an arbitrary strike price based on the valuation used in the IPO.
"Zuckerberg left his board out of the loop"
Were they ever in the loop?
Zuck's arse got hammered on the couch...
and I hope he enjoyed it.
However, he in turn "hammered" the collective arses of the lawyers and other parasites that usually flock like vultures around these deals so I say good on him for that.
As for "Shareholders Suits" etc, ummm..no. FB is private still, sorry.
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