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This article was published on October 1, 2010

Facebook Just Split Their Stock 5-1

Facebook Just Split Their Stock 5-1
Alex Wilhelm
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Alex Wilhelm

Alex Wilhelm is a San Francisco-based writer. You can find Alex on Twitter, and on Facebook. You can reach Alex via email at [email protected] Alex Wilhelm is a San Francisco-based writer. You can find Alex on Twitter, and on Facebook. You can reach Alex via email at [email protected]

Facebook seems to enjoy a good stock split. Following two 4-1 splits in 2006 and 2007 the company is back for more, expcept this time around Facebook is splitting its shares 5 to 1.

Do note that in the realest sense stock splits have no actual impact on the total value of the company who is doing the splitting. Shares are merely broken into smaller pieces which in aggregate have the same value as the previous total market value of the pre-split shares.

To put it more plainly, stock splits do not dilute the company’s shares.

Why would Facebook want to split its shares? Most likely to free up equity maneuvering room to continue to use stock as a tool to hire the best and brightest employees in the world. Also, with a 5-1 split, offered equity packages now sound better. Being offered 100,000 shares sounds better than 20,000 shares even if they have the exact same value.

If Facebook makes a formal announcement we will add it here.