Facebook announces 5-to-1 stock split

The company has divided up its shares for the third time as a means of keeping the price of individual shares low without suppressing its valuation or diluting shareholders' stakes.

Facebook formally sliced up its stock in a 5-for-1 division on Friday, a move designed to keep the price of individual shares lower as demand for the privately owned Facebook on secondary markets has been driving it upward.

"The reason is that the stock has risen significantly since our last split, and this allows us to bring it into a similar price range as other private companies," Facebook spokesman Jonny Thaw told CNET. "It also allows us to give everyone larger stock unit grants without increasing dilution for shareholders."

It's the third time in Facebook's six-year history that the company has undergone a split of its shares, following a 4-for-1 division in July 2006 and another in October 2007. Splitting stock is not an uncommon practice, considering that when individual share prices grow very high it can limit their growth. A lower share price can make the stock more accessible to small-time investors.

The sale of Facebook stock on the secondary market has been of great interest to Valley gossips hoping to get a read on what exactly the company's valuation may be, and when it may finally take the plunge and file for an IPO. Rumors that Facebook employees would be permitted to cash out some of their stock options began to surface about two years ago, and the company formally launched an employee stock buyback program with a major investor , Digital Sky Technologies (which has since changed its name to Mail.ru Group ) last year.

The company modified its stock structure to a more powerful dual-class system last year, in a move that some pegged as a preparation for going public soon. A report this summer said that there likely would not be an IPO until next year , and another report from Reuters on Friday tacked on yet another year--suggesting that Facebook would not go public before late 2012.

 

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