Facebook Considers Its Options

With hiring already tough in Silicon Valley, Facebook has just made its HR head's life much more difficult. Here's an excerpt from an article in today's Wall Street Journal about the company's options dilemma [subscription required].

There is a little-noticed downside to Microsoft Corp.'s investment in Facebook Inc.: The deal will likely raise the price of stock options issued by the social-networking company and could make it more difficult to hire talented employees.

Last week, Facebook appeared to score a major victory when Microsoft said it would invest $240 million in the Palo Alto, Calif., start-up, in exchange for a 1.6% stake. The investment values Facebook at $15 billion, up significantly from last year when a financing round valued the company at $525 million, according to a person familiar with the matter. Microsoft's investment cemented Facebook's reputation as one of the hottest Web start-ups in Silicon Valley.

With the rise in valuation comes a rise in the value of employee stock options. And in Silicon Valley, where stock options can be a major component of employee pay packages, more expensive stock options mean less potential upside for the option holders once start-ups go public or are sold.