Facebook could offer fund firms big payday

Facebook chief executive Mark Zuckerberg showed off the site’s “timeline” feature at a conference last year.
Paul Sakuma/AP File
Facebook chief executive Mark Zuckerberg showed off the site’s “timeline” feature at a conference last year.

When Facebook shares go public, a number of Boston money managers, including Fidelity Investments, stand to see big gains because they invested in the social networking site while its stock was still private.

These holders do not appear in Facebook’s initial public stock offering document, filed yesterday, because they are not among the largest owners. But Fidelity, John Hancock Funds, and Massachusetts Mutual Life Insurance Co. are just some of the many investors who will get a little piece of the action when Facebook shares start trading publicly.

The most anticipated new stock offering since Google Inc.’s in 2004, Facebook’s IPO will literally put billions in the pockets of a number of people. It also will add to the gains of ordinary investors in mutual funds such as Fidelity’s Contrafund, MassMutual’s Select Blue Chip Growth Fund (managed by T. Rowe Price), and John Hancock’s Blue Chip Growth Fund.


For instance, mutual funds managed by Fidelity’s Will Danoff, including Contrafund and Fidelity Advisor New Insights, held 4.2 million shares of Facebook, valued at $106 million at the time, according to a November filing with securities regulators. About 30 Fidelity funds have holdings in Facebook, a Fidelity spokeswoman said, following a $1 billion private offering to numerous investors a year ago.

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Fidelity spends a lot of time these days examining companies that aren’t yet publicly traded, especially in technology. Danoff famously made a killing on Google Inc. in this fashion, and he has since had private holdings in daily deal site Groupon Inc., social game maker Zynga Inc., and now Facebook.

James Lowell, an investment adviser and Needham-based editor of Fidelity Investor, a newsletter that tracks Fidelity funds, said, “They were in Google before it was public, and not just in a small way.’’ He added, “With Facebook, with Groupon, with others, they’re trying to recreate that recipe.’’

The fund companies managed to get these stakes in Facebook before it was public even though Goldman Sachs & Co., which handled the private placement, said it would not sell them to US investors.

The firms, including Baltimore-based T. Rowe Price, probably used their foreign offices to gain access.


By far the biggest holders of Facebook are its founders and venture capital backers.

Mark Zuckerberg owns 28.4 percent of the company, according to a regulatory filing. Those shares could be worth as much as $28.4 billion if the company is valued at $100 billion.

Accel Partners, the company’s first venture capital backer, has an 11.4 percent stake, according to the filing. Facebook cofounder Dustin Moskovitz has a 7.6 percent stake, and investment firm DST Global has 5.4 percent.

Greylock Partners, a longtime Boston venture capital firm whose West Coast office was an early investor in Facebook, is also likely to be a big winner, although it’s not large enough to be listed in the IPO document. Greylock was part of a group that invested $27.5 million in Menlo Park, Calif.-based Facebook in 2006, and then invested more afterward. If Greylock owns 1.5 percent of the stock, as estimated in published reports, it could reap $1.5 billion in the IPO.

Greylock and a number of other investors turned over the voting rights on their shares to Zuckerberg - ceding control of certain issues involving the company’s future to the founder. He has 57 percent of the total voting power.


Facebook didn’t always seem like a sure bet. In the early days, it was a college networking tool where one-quarter of the users would graduate each year and drop off the system. But that didn’t happen; instead Facebook’s users have exploded to an army of 845 million.

If Facebook is priced at $100 billion, its value will have doubled in a year: The private placement in which Fidelity and the other firms signed up for shares in January 2011 valued the company at $50 billion.

Beth Healy can be reached at