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1. Begin by navigating to the SEC EDGAR Web site, which provides access to company filings:

http://www.sec.gov/edgar.shtml. Choose “Search for Company Filings” and pick search by

company name. Enter “Facebook” and then search for its IPO prospectus, which was filed on the

date of the IPO and is listed as filing “424B4” (this acronym derives from the rule number

requiring the firm to file a prospectus, Rule 424(b)(4)). From the prospectus, calculate/determine

the following information (show your work):

a. The underwriting spread in percentage terms. How does this spread compare to a typical

IPO?

b. The size, in number of shares, of the greenshoe provision. What percent of the deal did

the greenshoe provision represent?

c. The list of underwriters/investment banks of the underwriting syndicate.

2. Next, navigate to Google Finance and search for “Facebook.” Using the data provided by Google

Finance calculate the following information (show your work):

a. Determine the closing price of the stock on the day of the IPO (use the “Historical prices”

link). What was the first day return? How does this return compare to the typical IPO?

b. Calculate the performance of Facebook in the three-month post-IPO period. That is,

calculate the return an investor would have received if he had invested in Facebook at the

closing price on the IPO day and sold the stock three months later.

c. What was the return for a one-year holding period?

3. Prior to the public offering, Facebook was able to raise capital from all the sources mentioned in

class. Let’s concentrate on one particular source, Microsoft Corporation.

a. Microsoft made one investment in Facebook, during October 2007. Go to Facebook’s

corporate news Web site (http://newsroom.fb.com) and locate the press release

announcing this investment. Using the information in that press release and the number of

shares owned by Microsoft listed in the IPO prospectus, calculate the per share price

Microsoft paid.

b. How much money did Microsoft receive from the IPO (assume Microsoft sold all shares

in the IPO)?

c. Calculate the holding period return (using the IPO price) that Microsoft earned on its

investment.

4. Facebook had only one angel investor, Peter Thiel (the founder of PayPal). Mr. Thiel invested

more than once in Facebook, both as an angel and, in later rounds, on behalf of investors in his

venture capital firm, Founders Fund. As an angel, Mr. Thiel invested $500,000 in September

2004. Assuming that all the shares he received in the angel round were registered under the name

Rivendell One LLC, use the information in the prospectus to calculate:

a. The per share price he paid as an angel.

b. The amount of money he received from the IPO (if all shares are sold).

c. The holding period return (using the IPO price) he made on his investment.

5. Using the information provided in the Facebook prospectus, and in the annual report and other

documents available on the Facebook’s investor relations webpage, analyze various available

corporate governance mechanisms (e.g., the structure of the board, executive compensation, etc.)

and give your opinion of the governance of Facebook.

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