Introduction: The print edition of the New York Times published on the 2nd said that the listing of Facebook would become a legend of wealth creation. Even the graffiti artists who used to paint murals for Facebook headquarters made a profit of $200 million because they chose to use stocks as remuneration.
The following is the full text of the article:
Benefiting legend
The graffiti artist who drew the wall map for Facebook's first headquarters made a wise decision: stock instead of money. The artist's name is David Choe. When Facebook shares go public later this year, the value of his shares will soar to $200 million.
The social network company announced on Wednesday that it will raise $5 billion in public listing, and the overall valuation of the corresponding company is between $75 billion and $100 billion. This IPO (initial public offering) will create a large number of billionaires and millionaires.
Some of them have become household names, such as the company's co-founder Mark Zuckerberg, but many of them are still unknown. Zuckerberg, 27, holds 533.8 million shares of Facebook stock. Based on the market value of $100 billion, or $53 per share, his stock will be worth $28.4 billion. He still holds indisputable control of the company - this is a great achievement because Facebook has raised a lot of money from the world's top business tycoons. He holds 28.4% of shares in Facebook and controls 57% of voting rights.
As a non conformist investor, Peter Thiel, the first external investor of Facebook, led the investment of 500000 dollars in Facebook as early as the end of 2004. His 44.7 million Facebook shares are currently worth more than $2 billion. The venture capital company Elevation Partners of Bono, the lead singer of the US U2 band, also invested $120 million in Facebook in 2010, and the returns he received from it were enough to make up for his investment failures in Palm and Forbes.
Accel Partners, with Jim Breyer as the chief partner, invested in the startup seven years ago. The company currently holds 201.4 million Facebook shares, and its return on investment will exceed a thousand times.
Facebook COO Sheryl Sandberg holds 1.9 million Facebook shares, with a shareholding ratio of about 0.1%. But the prospectus shows that she may eventually acquire 38.1 million additional shares, ranking among the richest women in Silicon Valley.
Past cases
There has been a wealth creation movement triggered by the listing of a technology enterprise for a long time. Netscape's IPO in 1995 created a large number of millionaires, including its founder Marc Andreessen. He has now become a famous venture capitalist in Silicon Valley, and has invested in Facebook since its early development. His 3.6 million shares are currently worth nearly $200 million. When Google went public in 2004 and raised $1.67 billion, it also created hundreds of millionaires, including many secretaries, even a masseur and a chef.
When Microsoft went public in 1986, Bill Gate controlled only 49.2% of the shares. Larry Page and Sergey Brin, the co founders of Google, held 15% shares respectively when the company went public in 2004.
Facebook's IPO has two differences. First of all, its expected valuation is extremely high - the highest ever record for an Internet company, even several times higher than Google when it went public in 2004. This social network, which Zuckerberg founded in his dorm at Harvard University eight years ago, is expected to be valued at more than $75 billion. Facebook's stock has been traded in the secondary market, which is dedicated to private company stock trading, with a valuation of more than 80 billion dollars.
Unlike Google's IPO, a considerable part of Facebook related wealth has been realized, which is mainly due to the developed secondary market and the enthusiasm for investment worldwide. Even if Facebook's valuation only reaches the lower limit of expectations, it can still bring the richest return to the venture capital industry ever.
"Facebook will bring crazy returns to early shareholders," said Alex Could, a technology investor and lecturer at Stanford School of Economic Policy Research, who has studied venture capital returns for many years. "Facebook has not only made many funds, but also made many enterprises."
Other shareholders
Facebook's listing has created a large number of winners. DST Global, an investment company led by Russian billionaire Yuri Milner, holds about 7% of Facebook shares, which he bought from 2009 to 2011 at a valuation of 10 billion to 50 billion dollars.
According to the prospectus, Zuckerberg's father, a dentist in New York, also received 2 million shares as a gift because he provided early operating funds for the company. Dustin Moskovitz, Zuckerberg's college roommate and Facebook co-founder who also dropped out, holds 133.8 million shares.
According to two former Facebook executives, Facebook has granted valuable options to about 250 employees at the early stage of its development. Since 2007, Facebook has stopped issuing options and granted restricted shares to employees instead. However, there are still many employees who joined after 2007 who own millions of shares. David Ebersman, Facebook CFO who joined in 2009, owns more than 7 million shares that have not yet been exercised.
In this series of famous shareholders, there are also some people who may not be popular with Facebook. Tyler Winklevoss, a Harvard graduate and former business partner of Zuckerberg, and Cameron Winklevoss brothers jointly hold about 1.2 million Facebook shares, which they obtained through the settlement agreement with Zuckerberg. They accused Zuckerberg of stealing their ideas in the lawsuit at that time.
Eduardo Saverin, another co-founder who has been far away from Facebook, once provided initial financing for the company, and later filed a lawsuit against it, hoping to get his due shares. He gained more benefits through the settlement agreement - up to 5% equity. But he has since sold many shares in the secondary market. Facebook's prospectus also doesn't mention Saverin.
Graffiti millionaire
The proceeds of David Cui, the graffiti artist mentioned above, obtained through Facebook are comparable to the record collection of Sotheby's in 2008 - this work created by Damien Hirst was sold for $200.7 million at that time.
In 2005, David Cui was invited by Sean Parker, then the president of Facebook, to paint murals at Facebook's first headquarters in Palo Alto, California. According to insiders, as a reward, Parker gave David Cui two choices: one was "thousands of dollars", and the other was Facebook stock of the same value.
David Cui once said that he thought Facebook's idea was "ridiculous and meaningless", but he still chose stocks.
According to a former Facebook employee, many of the original "consultants" of the company can obtain about 0.1% to 0.25% of the company's stock, David Cui is one of them. Although this proportion sounds small, they are now worth hundreds of millions of dollars at a valuation of 100 billion dollars. According to several people who know David Cui and Facebook executives, David Cui's stock is now valued at about $200 million.
Although David Choi was once down and out, he is still rich even without Facebook shares. (It is not clear whether he has sold some Facebook shares through the secondary market.) He has now become a successful artist, often holding art exhibitions in major museums. He declined to comment on privacy grounds. However, his book, David Cui, still contains many photos of his original works on Facebook.
David Cui's Facebook page shows the life of a modern rebel artist. In addition to his graffiti works, there are many photos of him having a party with girls who are wearing revealing clothes. In addition, he also spent a lot of money on alcoholic drinks. In recent weeks, David Cui has released several photos of the overpriced $40000 bottle of wine. He boasted that it would cost 888 dollars in one mouthful.
In his book, he gave a life advice: "Double your bet as long as you meet 11. Remember." Maybe he should give a better advice: When you meet Harvard dropouts in Silicon Valley, ask for stocks, not money.
