Many eyebrows were raised when Facebook bought WhatsApp for $19bn back in February. But closing the deal this week has seen the chat app’s value rise even further to $22bn.
Facebook completed its purchase mobile messaging service WhatsApp for up to $22 billion (£13.7 billion) in cash and stock in the firms biggest ever acquisition.
This is an increase on the $19 billion (£11.8 billion) initially announced as Facebook’s share price has risen since the deal was first announced.
Facebook will pay $4.59 billion (£2.86 billion) in cash and 177,760,669 shares in the company, which have risen to $77 (£48) since February.
The additional $3bn came about due to the increased value of Facebook’s stock in recent months.
WhatsApp founder Jan Koum will receive nearly $2 billion in stock, vesting over a four-year period, as an inducement for him to stay with the company, according to a regulatory filing.
The acquisition, which Facebook announced in February and recently received regulatory approval in Europe, underscores the sky-rocketing values of fast-growing Internet startups, and the willingness of established players such as Facebook and Google to pay out for them.
WhatsApp, which has more than 600 million monthly users, is among a new crop of mobile messaging and social media apps that have become increasingly popular among younger users. Snapchat, a privately owned mobile app that allows users to swap photos that can disappear after a few seconds, is raising money at a $10 billion valuation, according to media reports.
WhatsApp makes money by charging a $1 a year subscription in a handful of countries that have clear carrier billing systems and where credit card penetration is high, bringing in about $20 million in annual revenue, according to Forbes’ estimates.
That’s not enough to justify a $19 billion price tag, so Facebook is almost certainly looking at other ways the messaging service could make money.
Koum, who will serve as WhatsApp Chief Executive and become a Facebook director, will earn a $1 annual salary, similar to Facebook Chief Executive Officer Mark Zuckerberg. Koum will receive 24.9 million Facebook restricted stock units, worth roughly $1.9 billion at Monday’s share price.
WhatsApp, which has more than 70 employees, will continue to be based at its Mountain View, California, location.