March 8, 2021

Media Decoder Blog: Interpublic Sells Half Its Stake in Facebook

The Interpublic Group of Companies, which has owned a tiny stake in Facebook since the days the social networking Web site was just for college students, is selling half its holdings for a hefty profit.

Interpublic, which owns advertising and communications agencies like Deutsch, Initiative, McCann Erickson, Mullen and R/GA, acquired its ownership interest in Facebook in 2006.

The interest, amounting to about 0.5 percent of Facebook’s total shares, was bought for less than $5 million. Facebook agreed to sell the shares to Interpublic in exchange for Interpublic’s agreeing to spend $10 million with Facebook for clients of its agencies.

In a statement released on Monday morning, Michael I. Roth, chairman and chief executive at Interpublic, said the shares that are being sold would bring in “approximately $130 million.”

Interpublic acquired the stake as part of efforts to signal to current and potential clients that it was abreast of what was then the fledgling field of social marketing.

The “strategic relationship” with Facebook enabled Interpublic “to fast-track the growth of our social media offerings,” Mr. Roth said.

“Facebook has since become a part of daily life for hundreds of millions of people around the world,” he added. “Its ubiquity has meant the strategic value of our initial investment has moderated, while the financial value of that stake appreciated significantly.”

As a result, Mr. Roth said, “when an attractive opportunity to divest a portion of our position recently presented itself, we decided that it made sense to do so.”

In a filing with the Securities and Exchange Commission on Monday morning, Interpublic said that it would receive $133 million in net cash proceeds for the shares it is selling.

The 8-K filing did not disclose to whom the shares are being sold. Interpublic said that it would record a pre-tax gain of $132 million once the sale is closed.

The money will go toward an existing program under which Interpublic is repurchasing shares of its common stock, the company said. Interpublic also said it would increase the total amount of shares being repurchased by 50 percent, to $450 million from $300 million. Through last Friday, the company said, it had bought back stock valued at $187.6 million, including fees, or about 16.8 million shares.

Interpublic stock was trading on Monday morning at $8.74, up 10 cents or 1.2 percent.

The fact that Interpublic owned a micro-part of Facebook was not a secret; the company had discussed it over the years, most recently at a conference in New York in March for investors and reporters.

At that time, there were estimates that Interpublic’s total stake in Facebook was worth $200 million to $300 million, depending on how Facebook is valued and the size of the stake.

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