Facebook filed its 10-Q quarterly report with the Securities and Exchange Commission on Wednesday and cleared up a few remaining details concerning its colossal purchase of photo-sharing app Instagram.
The social network said that, as expected, it paid $300 million in cash for the property when the deal closed in August. Facebook added that it issued 12 million vested shares to nonemployee stockholders, available for sale in the November lock-up expiration, and 11 million unvested shares to employee stockholders. As such, the total aggregate value of the deal was $715 million at the time shares were issued.
The official language included in the documentation is as follows:
We have accounted for this transaction as a business acquisition for a total purchase price of $521 million, consisting of the issuance of approximately 12 million vested shares of our Class B common stock to non-employee stockholders of Instagram and $300 million in cash. The value of the equity component of the purchase price was determined for accounting purposes based on the fair value of our common stock on the closing date. We also issued approximately 11 million unvested shares of our Class B common stock to employee stockholders of Instagram on the closing date, with an aggregate fair value of $194 million, which will be recognized as they vest over a three -year service period as share-based compensation expense.
The social network first agreed to purchase Instagram in early April for $300 million and 23 million shares of common stock. The deal was originally valued at $1 billion, but Facebook’s tumultuous Wall Street ride has caused the value of the company’s shares to drop by as much as 50 percent.
Today’s revelation sheds a bit more light on the Instagram transaction, though the absolute value will always remain somewhat in flux. The hybrid-structured deal means that Instagram employees, flush with Facebook stock that will take three years to vest, will cash in their shares at higher or lower values depending on market fluctuations.
Time will tell if Facebook overpaid or got Instagram on the cheap; the application’s immediate, run-away growth and Twitter’s interest in the property suggest the latter to be the case.
“[Instagram] is expected to enhance our photos product offerings and to enable users to increase their levels of mobile engagement and photo sharing,” Facebook said in the filing.
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