Question

discuss Facebook share dilution in 4 sentences.

Answer 1

The early founders of Facebook included Mark Zuckerberg, Eduardo Saverin and Dustin Moskovitz. Mark was not happy with the performance of Saverin and in order to dilute his stake, he took some crucial steps:

1. Created a new entity in Delaware to acquire the existing company in Florida.

2. Eduardo's stake came down from 30 to 24% in the new firm.

3. Eduardo signed an agreement for 3 million shares but had to give up his Intellectual Property rights.

4. Zuckerberg issued 9 million shares again out of which nothing was issued to Eduardo.

This process instantly pulled down Eduardo's stake to less than 10%.