Facebook cleared by California to issue stock in Instagram deal

Facebook was cleared by the state of California to issue stock for its purchase of Instagram. State officials declared the transaction was “fair, just and equitable” at the conclusion of a hearing in San Francisco before the Department of Corporations.

The decision was expected. The hearing was unusual but not for California. California is one of six states that lets companies seek permission to issue stock rather than dealing with the Securities and Exchange Commission. Facebook agreed to buy popular mobile photo-sharing app Instagram in April for $300 million in cash and nearly 23 million Facebook shares. The shares were valued at $31, making the purchase worth at the time a cool $1 billion. The transaction is no longer worth as much after Facebook’s bungled initial public stock offering in May. The social networking giant priced its shares at $38. Since then the shares have dropped below $20. But Instagram founder and Chief Executive Kevin Systrom said in the hearing that he understood the ups and downs of the public markets and that the transaction is now worth more like $750 million.