Facebook looks to California law to speed up Instagram payout
The social network is trying is use a state law that would allow it to skip SEC registration and cut straight to the payout for finalizing its Instagram acquisition, according to a new report.
Drawing upon a little-known California law, Facebook is reportedly looking to hasten the payout of its Instagram purchase.
Typically with deals like this companies have to first register with the Securities and Exchange Commission but if the social network is able to use the California law it could save the company time and money. Only six states, including California, allow for this SEC exemption.
According to the Financial Times (subscription required), Facebook has scheduled an August 29 "fairness hearing" with the California Department of Corporations in San Francisco to discuss the terms and conditions of the proposed payout.
"They will save money on the filing fee and on the legal fees," California lawyer in Allen Matkins' securities group Keith Bishop told the Financial Times. "It's a lot less work to do the fairness hearing than to do a registration statement and have it reviewed by the SEC."
Apparently the fairness hearing filing is a few thousand dollars, but the SEC registration costs a percentage of the value of the company's registered shares, according to the Financial Times. The SEC registration can also take months. If Facebook can skirt the registration via a hearing, it would be able to make the Instagram payout immediately.
Facebook in April for $1 billion. However, the social network has since gone public and hasn't had the best of luck with its share prices. After kicking off with $38 a share, Facebook earlier this month with $19 a share.
"As the value of Facebook goes down, the value of Instagram goes down with it," Boston College law professor Brian Quinn told the Financial Times. "Six months ago Instagram employees thought they were getting $1 billion, now they're getting a half-billion dollars. Is that fair? That's a question the court is facing."
CNET contacted Facebook for comment. We'll update the story when we get more information.