When Facebook filed its fourth amendment for its IPO filing, we finally learned how high the company is valuing its Instagram purchase. Last month, Facebook announced plans to acquire Instagram for approximately $1 billion in cash and stock, although Instagram reportedly wanted $2 billion from Facebook. The price ended up being much more flexible: Facebook paid $300 million in cash and 23 million shares for Instagram, and there's a $200 million break-up fee if the deal doesn't go through.
Facebook today announced an IPO price range between $28 and $35. Given the 22,999,412 shares, Instagram will be valued at anywhere between $943,983,536 and $1,104,979,420. In other words, that's an extra 10 percent added to the previous estimate of $1 billion.
Facebook is expecting to close the Instagram acquisition this quarter, meaning that even after Facebook goes public, the value of Instagram will not be finalized. It will still be $300 million plus whatever the shares are worth at the end of June.
Facebook is rumored to launch its actual roadshow next week and go public in two weeks. Shares are expected to be priced on May 17, with trading beginning on May 18. That means there are still a few weeks during which the stock market will play with Facebook's stock price, and thus Instagram's price tag.
In less than two months, we'll finally know how much Menlo Park values the mobile photo app for Android and iOS. Regardless of what that ends up being, I think the general consensus will be that it's a huge amount of money.
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- Why Facebook acquired Instagram for $1 billion