Read Between the Lines: Facebook Inc (NASDAQ:FB) is Buying Back Shares

Late Tuesday, Facebook Inc(NASDAQ:FB) in a regulatory filing said that will withhold 101 million share of stock owed to employees on October 25, as part of its measures to stem the slide in the price of its shares.

The company also said that it would pay the tax bill associated with the stock grants with its own cash or its cash from its credit lines.

Extrapolating on this, Business Insider has interpreted this to mean that the social networking site is about to do a huge stock buyback at less than half of what it received for its share at the IPO in May.

Look at the reasoning. "By deciding to withhold 101 million shares of the employee stock grants and pay its tax bill with cash on the balance sheet, Facebook is effectively buying back those shares and retiring them. At $19 per share, the tax bill will amount to $1.9 billion, and the 101 million shares are worth about $1.9 billion.  So Facebook will effectively be using $1.9 billion of cash to buy back its own stock."

Now isn't that smart. Companies, the world over, usually indulge in stock buybacks when the share prices are low.

Can FB Rebound After The Recent Slump? Find Out Here

The company also said in the filing with the Securities and Exchange Commission that it plans not to do another stock offering in the next few months to raise cash to pay the tax bill associated with the stock grants.

According to Business Insider, the company will not do open market purchases of its shares like other company. Instead it will retire the stock that has been withheld from the employees and then give the cash equivalent of these shares to the government.

"In so doing, it will spend about $2 billion and modestly reduce its fully diluted share count—to about 2.6 billion from 2.7 billion (which has exactly the same impact as a buyback)."

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