A graffiti artist who painted the walls of Facebook's first headquarters seven years ago is set for a bumper payday of $200million after he agreed to take Facebook stock instead of cash for his work.
David Choe, 35, was asked to paint the offices in Palo Alto, California, in 2005, and was offered the choice by then-president Sean Parker of being paid a few thousand cash or the equivalent in shares.
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| David Choe |
Now, after a blockbuster $5billion Facebook stock exchange flotation moved a step closer last night, he is one of at least 1,000 company employees finally on their way to becoming millionaires.
Although Mr Choe reportedly considered the idea of Facebook ‘ridiculous and pointless’ at the time of his painting, he took the stock when offered the option, reported the New York Times.
Now he could end up being paid more for the job than Damien Hirst got at a record-breaking 2008 Sotheby’s auction. Now a successful artist, Mr Choe refused to be interviewed about his windfall.
Many ‘advisers’ to the company in its formative years were paid between 0.1 to 0.25 per cent of the company, according to a former employee. This now translates into tens and hundreds of millions.
Mr Choe, of Los Angeles, California, recently went to the new Facebook headquarters in Menlo Park to spray paint a wall, and can be seen in a video getting the help of founder Mark Zuckerberg, 27.
He also did the cover art for Jay-Z and Linkin Park's hit 2004 music album Collision Course and even created a poster of President Barack Obama for the White House, reported the New York Times.
Left-handed Mr Choe told Ion magazine that he developed a 'dirty style' because his left hand would always smudge his work as a child - and admitted he even sometimes uses his own blood.
Facebook yesterday submitted paperwork to regulators for the most anticipated initial public offering since Google in 2004, expected to value the hugely-successful company at up to $100billion.
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| Geniuses: Mark Zuckerberg, Dustin Moskovitz and Sean Parker are pictured in front of the graffiti by Mr Choe at Facebook's headquarters in Palo Alto, California, in May 2005 |
The company hopes to list its stock under the ticker symbol 'FB' on the New York Stock Exchange or Nasdaq Stock Market.
In its regulatory filing with the Securities and Exchange Commission, Facebook said it hopes to raise $5billion in its IPO - a new record for a tech company, surpassing Google's $1.9billion IPO in 2004.#
This is some turnaround for a firm which, as its founder explained in a letter with the filing, 'was not originally created to be a company', and still uses 'The Hacker Way' to guide its development.
The filing laid bare a number of key facts about the previously secretive firm - and exposed Mr Zuckerberg's strict control over many aspects of the company's management.
The site has 845million active users, and half of them typically visit the site on any given day.
While it may seem that everyone in the English-speaking world has a Facebook account, in fact the site has only penetrated 60 per cent of the market in the U.S. and the UK, and is most popular in Chile, Turkey and Venezuela.
The filing makes it clear that China, where Facebook is currently banned, is the next big target - but expresses doubt that it can craft a censorship policy which would be 'acceptable to us and to the Chinese government'.
Even without access to the Chinese market, and with relatively few users in countries like Japan and South Korea, Facebook made $668million in profit last year, out of total revenue of $3.7billion.
Advertising accounted for 85 per cent of that revenue, but that was less than in previous years thanks to the spectacular success of games company Zynga, which contributed 12 per cent of Facebook's revenue through royalties which amount to 30 per cent of the money spent on Zynga's games via Facebook.
And despite the runaway growth of Facebook since its origins in 2004, amazing power remains concentrated in the hands of one man: Mr Zuckerberg.
Despite owning no more than a quarter of shares, he will control 57 per cent of votes even after the sale of shares to the public.
The company's filing even singled out Mr Zuckerberg's control as a major risk which could jeopardise the company's performance in future - it pointed out that he was able to vote 'in his own interests, which may not always be in the interests of our stockholders generally'.
But he will not prove much of a burden to the company financially - his salary, which was $500,000 in 2011, is set to drop to just $1 next year.
He is unlikely to miss his salary, however, as Forbes magazine estimated Mr Zuckerberg's wealth at $17.5billion in its most recent survey of the richest people in the U.S.
Other risk factors mentioned in the IPO document include the fast pace of the technology business, the possibility of negative publicity and faults in the company's privacy policy - a repeated source of complaints from users.
The company is also, perhaps surprisingly, concerned too many users will adopt Facebook apps for smartphones and other mobile devices - because the apps do not carry advertising, and therefore do not bring in revenue for the site.
In a letter included in the filing, Mr Zuckerberg painted a rosy, idealistic picture of Facebook.
'Facebook aspires to build the services that give people the power to share and help them once again transform many of our core institutions and industries,' he wrote.
'At Facebook, we’re inspired by technologies that have revolutionised how people spread and consume information.
'We often talk about inventions like the printing press and the television - by simply making communication more efficient, they led to a complete transformation of many important parts of society.
'Today, our society has reached another tipping point. We live at a moment when the majority of people in the world have access to the internet or mobile phones — the raw tools necessary to start sharing what they’re thinking, feeling and doing with whomever they want.'
Mr Zuckerberg also pledged to stay true to Facebook's scrappy roots even on the road to becoming a multinational corporation.
'The word "hacker" has an unfairly negative connotation from being portrayed in the media as people who break into computers,' he wrote. 'In reality, hacking just means building something quickly or testing the boundaries of what can be done.'
While weak financial markets downsize IPOs, Facebook seems destined to set a new benchmark in a region famous for minting fortunes, with even the rank-and-file employees reaping millions.
FACEBOOK BY NUMBERS
845million monthly active users
483million daily active users
$668million profit in 2011
$3.7billion revenue in 2011
85% of that revenue came from advertising
$500,000 Mark Zuckerberg's salary in 2011
$1 Mark Zuckerberg's salary in 2013
0% Facebook's 'market penetration' in China
‘There's been discussions of sort of bucket list ideas that people are putting together of things they always wanted to do and now we'll be able to do it,’ said one ex-employee who joined in 2005.
He is looking into a space trip that would cost $200,000 or more with Virgin Galactic or one of the other companies working on future space tourism. He expects his shares to be worth $50million.
Meanwhile a group of current and former Facebook workers have begun laying the groundwork for an expedition to Mexico and want to partner with an archaeological Mayan ruins programme.
Facebook's earliest employees and early venture capital investors will see the biggest paydays.
But the wealth will trickle down to engineers, salespeople and other staffers who later joined the company, since most employees receive salary plus some kind of equity-based compensation.
Facebook's headcount has swelled from 700 employees in late 2008 to more than 3,000 today. There will be more than a thousand people looking at million-dollar-plus paydays after it goes public.
Liquidnet head of private trading Lou Kerner estimates that Facebook now has roughly 2.5billion shares outstanding, which would translate to a per-share price of $40 at a $100billion valuation.
Engineers are the most richly rewarded. A former Facebook recruiter said in 2009, the company gave an engineer with 15 years’ experience options to buy about 65,000 shares at $6 per share.
After a 5-for-1 stock split in October 2010, the engineer would now have the right to buy around 325,000 shares. Assuming a $40 share price, that would yield a profit of more than $12million.
According to another former Facebook employee, it was not unusual for the company to offer some executive-level hires up to 100,000 restricted shares as recently as three years ago.
But the company faces the risk that talented staff will leave with their new found wealth to make their own mark in technology by becoming entrepreneurs or investing in other promising start-ups.
For many of Facebook's staffers, the IPO will help pay off school loans and buy a house or car. Many homeowners and real-estate agents in California are eagerly anticipating a surge of new buyers.
‘Watch for Facebook proceeds to buy Palo Alto real estate,’ said David Cowan, a venture capitalist at Bessemer Venture Partners who backed business social network LinkedIn, among other companies.
Wealth managers and investment advisers are also looking to win new clients. ‘A lot of them are going to be multimillionaires at 30 and live to be 100,’ said one based in San Ramon, California.
The imminent flood of Facebook dollars is sure to provide a welcome boost to various local businesses in the Silicon Valley area, from high-end car dealerships to wine merchants.
Meanwhile the new Facebook millionaires may decide to donate some of their winnings to charities and non-profitable organisations, with many California-based and national groups set to benefit.
‘When wealth is created like that and folks are holding highly appreciating assets, it’s a great opportunity to start a philanthropic legacy,’ charitable giving expert Rob Mitchell told MSNBC.
The state of California will also benefit from the IPO by reaping hundreds of millions of dollars in capital gains taxes, from investors and employees profiting from Facebook stock sales.
California, which has a state government facing a $9.2billion deficit, taxes capital gains from stock sales and could be in for a big revenue boost when Facebook goes public.
BIG PAY DAY FOR THE BOYS WHO DIDN'T DEFRIEND FACEBOOK
Mark Zuckerberg
Age: 27
Net worth: $17.5billion
Owns 24 per cent of Facebook, previously worth $5.3billion
ROLE: Founder and Chief Executive Officer of Facebook
Currently creating his own monetary system 'Facebook Credits' to facilitate transactions and profits, according to Forbes.
Age: 27
Net worth: $17.5billion
Owns 24 per cent of Facebook, previously worth $5.3billion
ROLE: Founder and Chief Executive Officer of Facebook
Currently creating his own monetary system 'Facebook Credits' to facilitate transactions and profits, according to Forbes.
Dustin Moskovitz
Age: 27
Net worth: $3.5billion
Holds a 6 per cent stake in Facebook previously worth $1.3billion
ROLE: A co-founder and the social-networking site's first chief technology officer, Moskovitz left in 2008 and started Asana, a software company that allows individuals and small companies to better collaborate.
Age: 27
Net worth: $3.5billion
Holds a 6 per cent stake in Facebook previously worth $1.3billion
ROLE: A co-founder and the social-networking site's first chief technology officer, Moskovitz left in 2008 and started Asana, a software company that allows individuals and small companies to better collaborate.
Eduardo Saverin
Age: 29
Net worth: $2billion
Most recently held a 5 per cent stake in Facebook, previously worth $1.1billion, which he has since sold more than half of to invest in new start-ups.
ROLE: Co-founder of Facebook
Age: 29
Net worth: $2billion
Most recently held a 5 per cent stake in Facebook, previously worth $1.1billion, which he has since sold more than half of to invest in new start-ups.
ROLE: Co-founder of Facebook
Chris Hughes
Age: 28
Net worth: estimated at $700million
ROLE: Co-founder & original Facebook spokesperson.
Most recently served as Barack Obama's Director of online Organizing for his 2008 presidential campaign. Currently the executive director of a new social network called Jumo which connects individuals to global nonprofits.
Age: 28
Net worth: estimated at $700million
ROLE: Co-founder & original Facebook spokesperson.
Most recently served as Barack Obama's Director of online Organizing for his 2008 presidential campaign. Currently the executive director of a new social network called Jumo which connects individuals to global nonprofits.
Sean Parker
Age: 31
Net worth: $2.1billion
Owns 4 per cent of Facebook, worth over $880million
ROLE: Former Facebook president, helped capture initial investors for the company
Age: 31
Net worth: $2.1billion
Owns 4 per cent of Facebook, worth over $880million
ROLE: Former Facebook president, helped capture initial investors for the company
Winklevoss twins:
Age: 30
Net worth: They accepted a $20million cash settlement and Facebook stock that could now be worth more than $150million, according to AdWeek.
ROLE: Claimed they invented Facebook which was stolen by Mr Zuckerberg
Age: 30
Net worth: They accepted a $20million cash settlement and Facebook stock that could now be worth more than $150million, according to AdWeek.
ROLE: Claimed they invented Facebook which was stolen by Mr Zuckerberg
FACEBOOK'S FIVE CORE VALUES
Facebook chief executive Mark Zuckerberg outlined five core values for Facebook, in a letter to potential investors. The letter appears in regulatory filings for Facebook's initial public offering of stock. Here are the five values:
Focus on Impact
If we want to have the biggest impact, the best way to do this is to make sure we always focus on solving the most important problems. It sounds simple, but we think most companies do this poorly and waste a lot of time. We expect everyone at Facebook to be good at finding the biggest problems to work on.
Focus on Impact
If we want to have the biggest impact, the best way to do this is to make sure we always focus on solving the most important problems. It sounds simple, but we think most companies do this poorly and waste a lot of time. We expect everyone at Facebook to be good at finding the biggest problems to work on.
Move Fast
Moving fast enables us to build more things and learn faster. However, as most companies grow, they slow down too much because they're more afraid of making mistakes than they are of losing opportunities by moving too slowly. We have a
saying: 'Move fast and break things.' The idea is that if you never break anything, you're probably not moving fast enough.
Moving fast enables us to build more things and learn faster. However, as most companies grow, they slow down too much because they're more afraid of making mistakes than they are of losing opportunities by moving too slowly. We have a
saying: 'Move fast and break things.' The idea is that if you never break anything, you're probably not moving fast enough.
Be Bold
Building great things means taking risks. This can be scary and prevents most companies from doing the bold things they should. However, in a world that's changing so quickly, you're guaranteed to fail if you don't take any risks. We have another saying: 'The riskiest thing is to take no risks.' We encourage everyone to make bold decisions, even if that means being wrong some of the time.
Building great things means taking risks. This can be scary and prevents most companies from doing the bold things they should. However, in a world that's changing so quickly, you're guaranteed to fail if you don't take any risks. We have another saying: 'The riskiest thing is to take no risks.' We encourage everyone to make bold decisions, even if that means being wrong some of the time.
Be Open
We believe that a more open world is a better world because people with more information can make better decisions and have a greater impact. That goes for running our company as well. We work hard to make sure everyone at Facebook has access to as much information as possible about every part of the company so they can make the best decisions and have the greatest impact.
We believe that a more open world is a better world because people with more information can make better decisions and have a greater impact. That goes for running our company as well. We work hard to make sure everyone at Facebook has access to as much information as possible about every part of the company so they can make the best decisions and have the greatest impact.
Build Social Value
Once again, Facebook exists to make the world more open and connected, and not just to build a company. We expect everyone at Facebook to focus every day on how to build real value for the world in everything they do.
Once again, Facebook exists to make the world more open and connected, and not just to build a company. We expect everyone at Facebook to focus every day on how to build real value for the world in everything they do.
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