The Facebook (NASDAQ:FB) – WhatsApp Merger

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By Ross Schwartz on October 30, 2014 Social Media

WhatsApp is probably Facebook (NASDAQ:FB)’s most profitable acquisition, since it’s a popular app worldwide. The merger cost Facebook (NASDAQ:FB) $19 billion. Since then the company’s shares are fluctuating. They fell from $74 to$65.27, when the deal was closed. Its current net worth is nearly $23 billion.

Facebook (NASDAQ:FB) paid WhatsApp through 177.8 million in shares, in a bulk, with $4.59 billion cash for the company’s security holders; along with 45.9 million restricted stock units for the employees. Recently, the deal Facebook (NASDAQ:FB) made with the WhatsApp founder and CEO, Jan Koum, has also come to light. The CEO is due to receive a grant of 24,853,468 Facebook (NASDAQ:FB) RSUs for four years, and will remain the CEO of WhatsApp. This deal sums up to $2 billion, along with 45% WhatsApp ownership. The resultant comes to a total of $8 billion before tax. Hence, Facebook (NASDAQ:FB) has paid $21 billion so far.

What attracted Facebook (NASDAQ:FB) to WhatsApp is the latter’s remarkable financial figures. The financial statements for 2012, 2013, and first 6 months of 2014 are as under:

- In 2012 the company made $3.8 million in revenue

- In 2013, $10.2 million in revenue.

- In 2014, till June the revenue figures were of $15.3 million, which was big for the company’s $2.8 million a year ago for similar period.

- Company lost $55 million in 2012, $38 million of which were stock compensation

- 2013 saw a low of $138 million. $99 million of which were stock compensation

- First half of 2014 faced $233 million in loss, of which $100 were in stock compensation

- Further cost of $110 million in terms of issuing stock below value in 2014.

- Cash at hand was of $157 million by June 30^th 2014

- The accumulated deficit was of an alarming $663 million by the end of June 2014

- Negative operating cost was $3.5 million in 2012, $9 million in 2013 and a surprising $13.5 million in the first six months of 2014

Looking at these results, one can easily conclude that Facebook (NASDAQ:FB) paid $21 million with 10% shares to merge with a company that can produce $50 million revenue this year, and another $100 million for 2016. When comparing the performance with Facebook (NASDAQ:FB)’s expected result, we see a huge difference. Facebook (NASDAQ:FB) is expected to make $12 billion in revenue for 2014 and at least $17 billion in 2015.

It seems that Mark Zuckerberg, the Facebook (NASDAQ:FB) CEO, ended up striking a deal, worth 210 times WhatsApp 2016 revenue. This merger comes with several of perks and bonuses for both the companies.

Having said that, Zuckerberg is known for his business acumen, and probably foresaw the profits this merger could make. Having WhatsApp on the Facebook (NASDAQ:FB) platform might deliver in the long run. Facebook (NASDAQ:FB) has also made another acquisition recently. The company now owns Oculus (NASDAQ:OCLS), which is worth $2 billion in July and is far from making any profitable developments at the moment.