Facebook Board Told Late About $1B Instagram Deal
Facebook chief executive and founder Mark Zuckerberg met with Japanese prime minister Yoshihiko Noda Thursday.
Mark Zuckerberg, Facebook's wunderkind, decided to buy Instagram on his own, and told his board hours before a vote that as majority-share owner he intended to buy the company.
The report, which was confirmed by unnamed sources on Facebook's board, said that Zuckerberg had been negotiating with Instagram head Kevin Systrom for the past three days before letting the board know on April 8. Facebook acquired the photo-sharing service later that day, its largest acquisition ever, the Wall Street Journal reported.
Negotiating mostly on his own, Mr. Zuckerberg had fielded Mr. Systrom's opening number, $2 billion, and whittled it down over several meetings at Mr. Zuckerberg's $7 million five-bedroom home in Palo Alto. Later that Sunday, the two 20-somethings would agree on a sale valued at $1 billion. . . . By the time Facebook's board was brought in, the deal was all but done. The board, according to one person familiar with the matter, "Was told, not consulted."
With 57 percent of voting rights and 28 percent of Facebook stock, Zuckerberg was within his rights to proceed without board approval. Despite all this, the board did vote on the deal, but it was mostly a symbolic one. The deal was already done.
The more interesting facts are that Systrom was only hours from agreeing to $50 million in venture capital before Zuckerberg pounced. Does Zuckerberg have spies? Or was he simply on Systrom's speed dial? Either way, Systrom asked Zuckerberg for $2 billion, which was pretty gutsy considering his company has had zero revenue. Zuckerberg got that number down, but it's still likely an inflated one.
For those thinking of investing in Facebook, they should realize that Zuckerberg has shown that he's no silent CEO. He intends on brokering deals with or without board approval.