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Facebook, CEO will sell 70m shares

Mark Zuckerberg will use his stock sale proceeds for taxes and charity.

AFP/Getty Images/File 2013

Mark Zuckerberg will use his stock sale proceeds for taxes and charity.

MENLO PARK, Calif. — Facebook and its chairman and chief executive, Mark Zuckerberg, are selling a combined 70 million shares of Class A stock as the social media company prepares to join the Standard & Poor’s 500 index.

The offering includes more than 41 million shares from Zuckerberg, who also will buy Class B shares that carry more voting weight. After a premarket stock dip of more than 4 percent on the news, Facebook’s stock closed Thursday at $55.05, down 0.94 percent.

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The company said the Class A shares will be offered mainly to index funds whose portfolios are based on stocks included in the index.

The S&P 500 will add Facebook on Friday after markets close. The index is a list of companies that have a market capitalization of over $4 billion and is meant to be a snapshot of the US economy.

At Wednesday’s closing price of $55.57 per share, that would put the total value of the offering, not counting expenses, at about $3.89 billion. Zuckerberg’s offering of 41.3 million shares would generate about $2.3 billion based on Wednesday’s close, not counting expenses.

The company said Zuckerberg will use most of the proceeds from his sale of Class A shares to pay taxes he will incur in connection with exercising an option to buy 60 million shares of Class B stock. He’s also using part of it for charitable contributions.

It’s Zuckerberg’s decision to sell shares that probably led to Facebook’s stock-price decline.

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That said, a Standard & Poor’s equity analyst, Scott Kessler, noted that Zuckerberg’s ownership has declined ‘‘only slightly’’ since Facebook’s May 2012 initial public offering of stock, and that the planned sale ‘‘would only minimally reduce his stake and voting power.’’

‘‘We are not concerned by this news,’’ Kessler said in a note to investors, reiterating the firm’s ‘‘buy’’ rating on Facebook’s stock.

Each Class B share gives the shareholder 10 votes, while each Class A share comes with one vote. The deal will give Zuckerberg control over nearly 63 percent of the voting power of the company’s outstanding stock, according to a Securities and Exchange Commission filing.

Facebook Inc. will offer 27 million Class A shares, and the company expects to use any proceeds for working capital.

The company will have 2.54 billion Class A and Class B shares outstanding after the offering, or about 4 percent more than it had at the end of September.

Facebook’s shares are up about 44 percent from Facebook’s $38 IPO price but down slightly from the record high of $55.89, hit on Wednesday.

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