Social networking giant Facebook has reportedly created a dual-class share structure giving chief executive and founder Mark Zuckerberg more control over the company, leading some analysts to believe an IPO is on the agenda.
The development comes after Zuckerberg said earlier this year the company would eventually go public but that the social network is still “a few years out” from that goal.
The move to “A” and “B” class shares will give Zuckerberg, the board and current employees more power, indicating an intention to introduce long-term goals that may not depend on the approval of future shareholders.
Zuckerberg, Silicon Valley entrepreneur Marc Andreessen, Jim Breyer, Don Graham and Peter Thiel currently hold seats on Facebook’s board. Russian entrepreneur Yuri Milner attempted to take a seat on the board earlier this year but was rejected.
Internet giant Google, which has reportedly become a model for the social network as it becomes larger, also adopted a dual-class share structure when it went public in 2004.
“Facebook is a private company so we don’t typically share details on stock-related matters. But we did introduce a dual class stock structure because existing shareholders wanted to maintain control over voting on certain issues to help ensure the company can continue to focus on the long-term to build a great business,” a spokesperson said in a statement.
“This revision to the stock structure should not be construed as a signal the company is planning to go public. Facebook has no plans to go public at this time.”
As reported in the Wall Street Journal, the company has converted all its current stock to Class B shares, retaining 10 times more voting power than Class A shares. Current shareholders will have their shares remain as Class B unless an IPO goes ahead.
Having current board members and employees retain more voting power will allow the company to make more risky decisions than its shareholders would like, analysts have said.
This model has been emulated by Google and Berkshire-Hathaway, owned by billionaire Warren Buffet, which have often made business ventures deemed too risky by other shareholders.
The move comes after Facebook has continued to grow in comparison with rivals Twitter and News Corp-owned MySpace. It currently has 300 million users, and managed to grow twice as fast as Twitter during July after acquiring status-update integration tool FriendFeed.
The company is now valued at more than $US10 billion after it received a $US200 million investment from Russian tech group Digital Sky Technologies. DST purchased $US100 million worth of shares from employees and ex-employees.
It has introduce a real-time updating news feed, similar to the real-time search offered by Twitter, and has allowed integration with Apple’s iTunes software.
It is also generating revenue from advertising, with the company saying it was “cashflow positive” in the second quarter.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
