Facebook will make millionaires, but who has the shares?

The company is reportedly going to make over 1,000 people millionaires when it finally goes public next year, according to a new report.

Don Reisinger
Don Reisinger
Former CNET contributor Don Reisinger is a technology columnist who has covered everything from HDTVs to computers to Flowbee Haircut Systems. Besides his work with CNET, Don's work has been featured in a variety of other publications including PC World and a host of Ziff-Davis publications.
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If Facebook finally goes public in 2012, the world's largest social network could create well over 1,000 millionaires, a new report claims.

Reuters, citing several sources, reported the social network has over the years supplemented salaries with stock. The move, which is common in startups, helps keep immediate costs down, but also provides employees with additional incentive to stay with the company and focus their efforts on helping it grow.

Facebook, however, is a special case. Although many startups offer shares, few help employees become millionaires. With over 3,000 employees now, it's conceivable that by the time those folks can cash out their Facebook stock, over one-third of the company's employees will be millionaires.

That said, according to Reuters, the distribution of shares isn't even. Facebook co-founder Mark Zuckerberg owns about 20 percent of the company's shares. Aside from him, it appears that the biggest paydays will be reserved for the company's other top executives and its venture capital investors, such as Accel Partners and Greylock Partners.

Speaking of those top executives, according to Reuters' sources, Facebook has handed over as much as 100,000 restricted shares just to bring each of them on board. Considering that the company is believed to have about 2.5 billion shares and will likely come with a $100 billion valuation, the company's shares may be priced $40 apiece. Executives, then, would walk away with $4 million each for their efforts.

Engineers have the most to gain at Facebook, according to Reuters' sources. As recently as 2009, Facebook was giving engineers with 15 years experience the option to buy 65,000 shares at $6 a share. In October 2010, the news service claims, Facebook commenced a 5-for-1 stock split, increasing each engineer's ownership to 325,000 shares. Assuming the same $40-per-share price, those folks could conceivably make $13 million in the offering.

But now, as Facebook's IPO draws closer, the company is becoming a bit stingier with its stock outlays. A manager will now come on-board with about 2,000 to 3,000 shares, and the company has made it a habit of hiring contract workers who don't get stock, Reuters' sources say.

Although stock options are a desirable way for startups to attract talent, after making people millionaires on an IPO, they can become a risk. After Google went public in 2004, it was believed that more than 900 employees became instant millionaires, including a chef and masseuse. But just four years after the IPO, nearly one-third of Google's first 500 employees had left the company for new (ad)ventures. And over the last few years, more pre-IPO employees have left the company with boatloads of cash in their bank accounts.

Chances are, the same will happen at Facebook. The only question is when. So far, Facebook has not made its IPO intentions known, and until it does, hope of becoming a millionaire at the social network is still little more than wishful thinking.