One of the biggest tech stories this month was Facebook’s acquisition of Instagram. Facebook expects this deal to be closed in the second quarter of 2012. Facebook is paying Instagram $300 million in cash and 23 million shares of its common stock as part of the acquisition. However, if the deal goes belly up, Facebook will still owe Instagram $200 million.
Facebook made note of this in the Liquidity and Capital Resources section of its recent filing with the Securities and Exchange Commission. Facebook will have to pay this amount if the government rejects the acquisition for some reason, or if Facebook or Instagram has a change of heart.
We don’t think the government will have a problem with Facebook buying Instagram, but these measures must be put in place just in case.