Mail.ru Group, DST funds may sell Facebook stock
MOSCOW. May 4 (Interfax) - Mail.ru Group, controlled by Alisher Usmanov and the DST funds he set up with Yury Milner and their partners, will take part in the Facebook IPO, selling some of their stock in the social networking site.
DST intends to sell 26,255,972 shares, the Facebook IPO prospectus says. The fund DST Global will sell 3,442,708 shares, DST Global II 1,199,040 shares, DST Global III 339,443 shares, DST USA 5,647,205 shares, and DST USA II 15,627,576 shares.
Judging from the pricing corridor Facebook has set at $28-$35 per share, DST could make from $735.2 million to $919 million.
Mail.ru Group is looking to sell 11,270,402 shares, which would make it from $316 million to $394 million.
Under an underwrite over-allotment option, DST could sell another 3,938,399 shares for from $110.3 million to $138 million, Mail.ru 1,690,560 shares for $47.3 million to $59.2 million.
The DST funds currently hold 36,711,928 class-A shares (31.2% of this share type), giving it the rights to a single vote, and 94,567,945 class-B shares (5.3%), each of which represents ten votes. DST's total voting stake is 5.7%. After the IPO, DST's voting stake will rise to 5.7% - its stake in class-B shares will be 5.8% and in class-A shares 2.6%. Investors will only be ale to acquire class-A shares in the IPO, because the number of these shares in Facebook charter capital will increase as a result of the conversion of sold class-B shares.
After the IPO Mail.ru will be left with only class-B shares - 2.9% (now 3.1% and 1.1% of class-A shares). The group's total voting stake in Facebook will decrease from 3.1% to 2.8%.
If the organizers' over-allotment option is exercised in full, DST's class-B stake will increase to 5.9% but its class-A stake will drop to 2%, while its total voting stake remains at 5.7%. Mail.ru's stake after the option is exercised will not change.
The two outfits' stakes under a special shareholders agreement are considered unaffiliated between themselves. In aggregate, Mail.ru and DST Global will after the IPO have 15,600,287 class-A shares (all of DST's) and 134,505,22 class-B shares (DST - 89,423,614, and Mail.ru - 45,081,608).
The stock belonging to the companies will fall under a lock-up: 43,155,333 shares would not be sellable for three months from now, 13,134,236 for seven months, and the remaining 93,815,940 for a year.
The terms of the lock-up were eased last month. Initially it was to apply to half the interest in these shares for six months, to 25% for one year, and for the other 25% for one and a half years.
Mail.ru and DST are among the investors whose rights to be involved in the management of Facebook are restricted. The companies struck an agreement per which the right to vote with their shares was secured by Facebook founder Mark Zuckerberg. The agreement also prohibits the two company's from acquiring Facebook assets, nominate candidates for the board of directors, or form groups with other shareholders.
Zuckerberg's voting rights were delegated to most of the biggest shareholders, including the fund Accel Partners (11.4% of the votes), Dustin Moskovich (7.6%), Hong Kong billionaire Li Ka-Shing, the fund Elevation Partners, and front man for the rock group U2 Bono.
In the case with the Russian investors, the Facebook founder did not restrict rights to vote with their shares. An additional agreement was struck with Mail.ru and DST that stipulates that if Zuckerberg dies or his ability to work is lost, the class-B shares belonging to the companies will automatically convert into class-A shares.
Facebook intends to itself sell investors 180 million class-A shares and its investors 157,415,352. The company could raise $5-$6.3 billion, its co-owners $4.4-$5.5 billion. Total IPO volume will be $9.4-$11.8 billion, and pricing is slated for May 18.
IPO organizers (the three leading ones being Morgan Stanley, JP Morgan, and Goldman Sachs) have received the option for an additional placement of 50,612,302 additional shares in the even of over-subscription. If the option is exercised, the total IPO volume will reach $10.9-$13.6 billion.
Facebook's capitalization could reach $77-$96 billion with the IPO. That would be a record for IPO's in the United States, the Wall Street Journal writes. For comparison, Internet giant Google was valued at $23 billion during its IPO in 2004. At present, the record capitalization valuation resulting from an IPO is held by United Parcel Service, which was in 1999 valued at $60.2 billion.
Zuckerberg's stake in the company might be valued at $18.7 billion. He plans to sell 30.2 million shares for a total of roughly $1 billion. After the Facebook IPO, he will control 57.3% of the company's voting shares, including the stakes of other shareholders to which he has voting rights (including DST). All in all, around half the shares put up for sale now belong to company founders, employees, and investors.
Goldman Sachs intends to sell some 13.2 million shares for a possible $460 million or so.
