4 ms·

I am a facebook shareholder, and your argument makes no sense. Zuck will do what he thinks is best for Facebook, and that doesn't include giving money away to "

by paul 15y ago

I am a facebook shareholder, and your argument makes no sense. Zuck will do what he thinks is best for Facebook, and that doesn't include giving money away to "insiders".

hristov 15y ago
My argument is this Series B deal added significantly to the cost of the purchase without adding to the value of the purchase. Since Facebook certainly knew it was happening it is hard to believe they allowed it to happen. But I suppose if you do have trust in Zuck you do not have to look too closely at the details of deals like this. In any event, who am I to say anything, I am not in fact a facebook shareholder. I am just your average HN procrastinator. I am sure you know how to look after your own interests.
- paul 15y ago
  What makes you think that it added to the cost of the deal? If anything, a better case could be made that the Instagram shareholders gave up $50M.
  - hristov 15y ago
    You could be right. As I mentioned at least one side of this trade gave up money so that the Series B investors could get a quick 100% profit, and I am not sure which. I assumed it was Facebook because of (1) the seemingly high purchase price (2) the way the rumored final price was a neat 2x multiple of the Series B valuation (3) the fact that Facebook by virtue of being a much larger company with much more shareholders would seem to have longer and more nebulous fiduciary duty connections than Instagram. But I admit, all of those reasons are quite speculative. I could be wrong. It could be that the Instagram shareholders knowingly gave up some of the purchase money in order to have funding in case the deal fell through.
    - paul 15y ago
      Obviously Facebook would have liked to pay a lower price (and I'm sure they've made previous offers which were turned down by Instagram). Raising this money strengthened Instagram's bargaining position, which is why it was a smart move for them.
- brlewis 15y ago
  Paul has additional credentials besides being a shareholder. See his profile.
  - hristov 15y ago
    I know who Paul is. While I certainly admire him and would like to thank him for Gmail, I hope I am still allowed to have an occasional mild argument with him.
    - brlewis 15y ago
      Your comment seemed to imply that Paul had not looked closely at deals with Facebook: "But I suppose if you do have trust in Zuck you do not have to look too closely at the details of deals like this."
  - bane 15y ago
    Don't give in to the appeal to authority!
- muhammadatt 15y ago
  What makes you think that Facebook allowed anything? What power does Facebook have to dictate anything to Instagram prior to purchase? I think you have a misunderstanding of how deals like this take place. Facebook would have undoubtedly preferred to close the sale prior to the B round, but I am sure that whenever Facebook originally came calling, Instagram maintained that they were not interested in selling. I know this only because this is what hot target companies always say when receiving unsolicited offers. Instagram followed up by putting its money where its mouth was and closing a big round that gave it enough money to stay independent for a long time while growing the company. At that point, Facebook's only option was to go big or go home. Facebook could have tried to preempt the B-round by raising its bid before the round closed, but it seems pretty clear that it was going to take about $1B to get Instagram off the block, whether that happened before or after the B round. At the end of the day, the B-round does not make a huge deal to Facebook either way - to the extent that you are prepared to pay $1B for a company, you're not going to be too worried about a measly $50M going out the door.

by paul 15y ago

I am a facebook shareholder, and your argument makes no sense. Zuck will do what he thinks is best for Facebook, and that doesn't include giving money away to "insiders".

hristov 15y ago

My argument is this Series B deal added significantly to the cost of the purchase without adding to the value of the purchase. Since Facebook certainly knew it was happening it is hard to believe they allowed it to happen. But I suppose if you do have trust in Zuck you do not have to look too closely at the details of deals like this. In any event, who am I to say anything, I am not in fact a facebook shareholder. I am just your average HN procrastinator. I am sure you know how to look after your own interests.

paul 15y ago
What makes you think that it added to the cost of the deal? If anything, a better case could be made that the Instagram shareholders gave up $50M.
- hristov 15y ago
  You could be right. As I mentioned at least one side of this trade gave up money so that the Series B investors could get a quick 100% profit, and I am not sure which. I assumed it was Facebook because of (1) the seemingly high purchase price (2) the way the rumored final price was a neat 2x multiple of the Series B valuation (3) the fact that Facebook by virtue of being a much larger company with much more shareholders would seem to have longer and more nebulous fiduciary duty connections than Instagram. But I admit, all of those reasons are quite speculative. I could be wrong. It could be that the Instagram shareholders knowingly gave up some of the purchase money in order to have funding in case the deal fell through.
  - paul 15y ago
    Obviously Facebook would have liked to pay a lower price (and I'm sure they've made previous offers which were turned down by Instagram). Raising this money strengthened Instagram's bargaining position, which is why it was a smart move for them.
brlewis 15y ago
Paul has additional credentials besides being a shareholder. See his profile.
- hristov 15y ago
  I know who Paul is. While I certainly admire him and would like to thank him for Gmail, I hope I am still allowed to have an occasional mild argument with him.
  - brlewis 15y ago
    Your comment seemed to imply that Paul had not looked closely at deals with Facebook: "But I suppose if you do have trust in Zuck you do not have to look too closely at the details of deals like this."
- bane 15y ago
  Don't give in to the appeal to authority!
muhammadatt 15y ago
What makes you think that Facebook allowed anything? What power does Facebook have to dictate anything to Instagram prior to purchase? I think you have a misunderstanding of how deals like this take place. Facebook would have undoubtedly preferred to close the sale prior to the B round, but I am sure that whenever Facebook originally came calling, Instagram maintained that they were not interested in selling. I know this only because this is what hot target companies always say when receiving unsolicited offers. Instagram followed up by putting its money where its mouth was and closing a big round that gave it enough money to stay independent for a long time while growing the company. At that point, Facebook's only option was to go big or go home. Facebook could have tried to preempt the B-round by raising its bid before the round closed, but it seems pretty clear that it was going to take about $1B to get Instagram off the block, whether that happened before or after the B round. At the end of the day, the B-round does not make a huge deal to Facebook either way - to the extent that you are prepared to pay $1B for a company, you're not going to be too worried about a measly $50M going out the door.