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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.
by 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 agoYou 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 agoObviously 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.