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Facebook's $1bn Instagram buy sealed by Zuckerberg alone

19 Apr 2012
Mark Zuckerberg introduces video chat from Skype at Facebook HQ

Facebook's acquisition of imaging firm Instagram was conducted by chief executive Mark Zuckerberg with little input from the company's board of directors.

The Wall Street Journal cited company sources in reporting that Zuckerberg engaged in direct negotiations with Instagram founder Kevin Systrom on a deal to bring the two companies together.

The report claims that Facebook's board was only notified of the talks after the two had agreed on an acquisition.

Facebook later announced that it had agreed to a $1bn deal with Instagram shareholders which would include a cash payment, as well as a stake in the company.

The deal comes as Facebook prepares to conduct its eagerly-anticipated initial public offering.

The deal, which is reportedly scheduled for May, could see Facebook's value climb as high as $100bn and will change the rules for Zuckerberg, say analysts.

Rob Enderle, principle analyst with the Enderle Group, told V3 that when the company goes public and shareholders enter the picture, the young chief executive will need to operate alongside the board. A deal such as the one Zuckerberg made with Instagram could well prove disastrous for the social network.

"You take massive wealth, youth, and the lack of any oversight and you can have some monumental avoidable mistakes increasing the risks surrounding Facebook and their IPO exponentially," Enderle said.

"Once public, the rules change dramatically and moves like this could bankrupt the company, result in SEC sanctions, and even lead to criminal charges and have with other firms."

 

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Shaun Nichols
About

Shaun Nichols is the US correspondent for V3.co.uk. He has been with the company since 2006, originally joining as a news intern at the site's San Francisco offices.

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