Facebook rules out share sale to cover tax bill

Wed Sep 5, 2012 10:34am EDT
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By Alexei Oreskovic

SAN FRANCISCO (Reuters) - Facebook Inc promised not to sell stock to cover a nearly $2 billion tax bill and said it will allow employees to cash in their stock weeks ahead of schedule, moving to soothe nervous investors and its own staff as its share price spirals downward.

The world's largest online social network company, which has lost more than 50 percent of its market value since going public in May, said on Tuesday its total shares outstanding will be reduced by roughly 101 million shares as a result of the move.

Shares of Facebook rose 1.8 percent in after hours trading to $18.05.

Facebook will cover the stock compensation tax bill with existing cash and with borrowing from its credit facilities, the company said in a regulatory filing.

"The fact that they are using cash is a good thing. It feels like a mini buyback in a way because you're in essence reducing your share count by 101 million shares," said Susquehanna Financial Group analyst Herman Leung.

Facebook has suffered a painful debut on the public markets, as investors have fretted about its slowing revenue growth and a large pool of additional shares set to hit the market as "lock-up" restrictions on employees selling shares expire.

"Coming out and showing that they're being a little more active in supporting the stock is good for investors," said Baird & Co analyst Colin Sebastian.

"These are the kinds of things they can do until the figure out how to better monetize the sites, to help alleviate some of the pressure on the stock," he said.   Continued...

The Facebook logo is seen on a screen inside at the Nasdaq Marketsite in New York May 18, 2012. REUTERS/Shannon Stapleton