Facebook Announces 5-For-1 Stock Split

-Money Icon-Facebook has announced a 5-for-1 stock split of the private company’s shares. Jonny Thaw, a Facebook spokesperson, told Reuters and CNET that “The reason is that the stock has risen significantly since our last split, and this allows us to bring it into a similar price range as other private companies. It also allows us to give everyone larger stock unit grants without increasing dilution for shareholders.”

In other words it’s a cosmetic change that will help artificially increase the perceived value of the shares. An anonymous source accurately stated one justification of the change, “If you were going into Facebook, before they would have been able to say I’m going give you 10,000 restricted stock options, now they can say I’m going to give you 50,000; it sounds better”.

Facebook’s valuation, as determined by the active trading of shares through secondary markets, has soared in recent months to over $33 billion. Revenue estimates also continue to be increased. While Peter Thiel, one of Facebook’s early investors, recently noted that the company will probably not file for a public offering before 2012, shares of the company have been in high demand through private markets.

While cosmetic, stock splits are one of those things that can still help increase interest in a company’s shares. It leaves me wondering how high Facebook’s valuation will get before they file to go public. For now, we’ll have to wait and see!