Facebook has paid far lower than the announced US$1 billion in cash and stock for photo-sharing app Instagram, following a drop in its share price.
The social networking company said in its Form 10-Q quarterly report to the U.S. Securities and Exchange Commission on Wednesday that it accounted for the transaction as a business acquisition for a total purchase price of $521 million, consisting of the issuance of about 12 million vested shares of its Class B common stock to non-employee stockholders of Instagram and $300 million in cash.
It also issued about 11 million unvested shares of its Class B common stock to employee stockholders of Instagram on the closing date, with an aggregate fair value of $194 million , which will be recognized as they vest over a three-year service period as share-based compensation expense.
The value of the equity component of the purchase price was determined for accounting purposes based on the fair value of its common stock on the closing date, Facebook said.
Facebook closed the Instagram acquisition in August after receiving approvals from regulators including from the U.S. Federal Trade Commission and the U.K. Office of Fair Trading.
The company announced in April that it was buying Instagram in San Francisco for about $1 billion, including $300 million in cash and the rest through 23 million shares of its common stock. But as its share price slid, it became evident that the deal would be closer to $750 million.
Facebook's shares had closed at $19.50 -- a little over half of its $38 IPO price in May -- on the Nasdaq exchange on Tuesday, before Facebook released its quarterly results, but rose in after-hours trading after the company reported improvements in the critical mobile market.
During the nine months ended Sept. 30, 2012, Facebook also completed other business acquisitions for a total consideration of $87 million. It did not provide details. It also acquired $633 million of patents and other intellectual property rights. The largest deal was $550 million in cash to Microsoft over patents it had recently acquired from AOL.
Instagram is expected to enhance Facebook's photos product offerings and to enable users to "increase their levels of mobile engagement and photo sharing," Facebook said in the filing.
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