Facebook Inc. (NASDAQ:FB) might have had a rough debut on the NASDAQ market back in May, but it was prepared to pay its tax bill had the company held up to its initial $104 billion market cap at the time of its IPO. But now that the stock is trading at only about 55 percent of its IPO price, the company is deciding to streamline some of its finances.
Facebook (NASDAQ:FB) is apparently planning to reduce a $3 billion credit line by 50 percent, and lengthen the term by two years to three years because of a lower tax bill that is expected, said a couple of sources. The plans aren't finalized, to be clear, but the company has acknowledged that because of the slumping stock price, it's estimated tax bill for 2012 is expected to be about $2 billion, which is about a 45 percent withholding. The company had opened two credit lines totaling about $8 billion just before the IPO, but has indicated recently that it would initially use a secondary stock offering to pay the tax bill, but in a recent filing Facebook Inc. (FB) stated that because of market conditions, the company would instead pay its bill out of cash reserves or its credit lines.
The $3 million credit line was set up by JPMorgan Chase and Morgan Stanley, the primary underwriters, and was specifically earmarked for the tax bill. Neither underwriter has yet to comment on the reduction of the "bridge loan" or the increase in term from one year to three years. While this demonstrates the issues that Facebook Inc. (NASDAQ:FB) stock has had, this can also be good for investors like billionaire fund manager Steven Cohen of Sac Capital Advisors because it shows that the company can now have more manageable debt obligations.