Facebook Looks to Capitalize on S&P 500 Inclusion -- WSJ Blog
Dec 19 at 10:28
(This story was published by The Wall Street Journal Online's MoneyBeat
blog at http://blogs.wsj.com/moneybeat/)
By Matt Jarzemsky
Facebook Inc. and the insiders selling in the company's stock offering
Friday are seizing on the the social-media firm's inclusion in the S&P 500 stock
Earlier this month, S&P Dow Jones Indices announced that Facebook would
join the S&P 500, the benchmark gauge for U.S. stocks, effective after Friday's
close. As a result, index-tracking funds that follow the S&P 500 will need to
buy Facebook's shares at that time.
The company along with CEO Mark Zuckerberg and director Marc Andreessen
are offering shares "primarily to index funds whose portfolios are primarily
based on stocks included in the S&P 500 index," according to a prospectus for
In other words, the sellers are taking advantage of a moment of unusual
demand for the shares to raise cash. Many index funds that would typically buy
Facebook on Friday's close will now likely buy shares in the offering, people
familiar with the deal said.
Such trades aren't unheard of: The Treasury Department made a similar move
in its June sale of GM shares , when the auto maker entered the S&P 500.
Meanwhile, Facebook's shares, which languished for a year after going
public, have risen 109% this year through Wednesday.
Wednesday's closing price values the 70 million-share offering at $3.89
billion, which would mark the biggest U.S. follow-on stock offering since a $
20.7 billion sale of American International Group Inc. shares in December 2012,
according to Dealogic.
So far this year, the biggest follow-on--or stock sale by an
already-public company or its investors--was a $3.06 billion sale of Crown
Castle International Corp. shares in October.
Facebook has a market cap of about $136 billion, according to FactSet.
The company's May 2012 initial public offering raised $16 billion.
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