JWI 531: Financial Management II

Assignment 2: The Face Book Deal

Due Week 6, Day 7 (Weight: 16.5%)

The following are specific course learning outcomes associated with this assignment:

•     Evaluate the qualities of effective corporate governance.

•     Use technology and information resources to research issues in advanced financial management.

•     Write clearly and concisely about advanced financial management using proper writing mechanics.

Introduction:

•     The past two modules have been a bit of a mash-up of different ideas and tools, which makes it difficult to ask you to perform a neat, simple task that covers all the material that we covered. Instead, we’re going to ask you to synthesize the bigger concepts from past lectures. We’re going to do so using a company that most everyone is familiar with: Facebook.

•     Facebook, as everyone pretty much knows now, rocketed to popularity starting in 2005 and hasn’t looked back since. As you might expect from a highly successful, capital-intensive, high-tech operation that’s growing at blazing speeds, the company has gone through several rounds of financing to finance business growth. We’re going to ask you to look at that financing and explain to us what happened.

•     Though a savvy researcher could find these transactions herself via Google if she truly wanted to, we’ve gone ahead and pulled the big ones up for you in chronological order to save you some time. We encourage you to investigate each of these further, however. There’s no shortage of background on each of these. Here they are in nice news-bite capsules for digestion:

o  The Facebook group announced that it has raised between $10 million to $12 million in first-round financing led by Accel Partners on April 15, 2005. As a part of the transaction, Jim Beyers, a Managing Partner at Accel Partners, joined the company’s board. The post-money valuation of the company was $100 million.

o  Facebook, Inc. announced that it has raised $27.5 million in its third round of funding led by new investor Greylock Partners on April 19, 2006. New investor MeriTech Capital Partners and existing investor Accel Partners invested in the transaction. The post-money valuation of the company was $525 million.

o  Facebook, Inc. announced that it will raise $240 million in an equity round of funding from new investor Microsoft Corporation on October 24, 2007. As a result of the transaction, Microsoft Corporation will now hold 1.60% stake in the company. The round was raised at a post-money valuation of $15,000 million.

o  Facebook, Inc. announced that it has raised $200 million in funding from Digital Sky Technologies Limited on May 26, 2009. Digital Sky Technologies Limited invested in preferred stock and acquired 1.96% stake, valuing the company at $10 billion.

 
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