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November 26, 2009

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Facebook may be on the pathway to an IPO

FACEBOOK has created a dual-class stock structure designed to give founder Mark Zuckerberg and other existing shareholders control over the company.

The move could be seen as laying the groundwork for an initial public offering, though the social network said on Tuesday it had no plans to list shares "at this time."

The dual-class structure is what Google Inc's founders, Larry Page and Sergey Brin, created to keep voting control over that company before it went public in 2004.

Google's Class B shares, owned by Page, Brin, CEO Eric Schmidt and some directors, hold 10 times the voting power as regular, Class A stock.

In a statement, Facebook Inc said the company introduced the stock structure because its existing shareholders wanted to keep control when voting on issues it faces.

The company didn't say which executives and employees would get the shares with the higher voting power.

The Wall Street Journal, citing unnamed sources, said Facebook was converting the shares of all its current stockholders into Class B shares.

That would be a departure from Google's decision to keep such shares in the hands of a few top executives - something for which the search company has been criticized.

Dual-class structures aren't limited to high-tech companies.

The New York Times Co, among others, has one to give control to the Ochs-Sulzberger family even though its members own only one-fifth of the newspaper company.



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