Exactly. They could have also demanded that the series B does not take place. And they did neither of these things. Which most likely means the people that made the decision did not have the best interests of the company in mind.
It is not that complicated. Let's say there is X amount of economic benefit from the deal. Initially (i.e. before the series B) that benefit would be shared between Facebook and the initial (i.e., before the series B) shareholders of instagram. Facebook would get the benefit of owning the company minus the purchase price and the investors would get the purchase price.
But after the series B there is another party, the new Instagram shareholders which must also share in that benefit. This means that either Facebook or the initial shareholders or both get less benefit than they would have gotten if the series B had not happened.
So who got less benefit? Well in these cases one just has to ask oneself who is likely to make a decision against their own benefit. And when you look at people making decisions against their own benefit it usually the ones with the longest and remotest chain of fiduciary duties that do it.
So I guessed that it was facebook that might have done it because it has much more and more remote shareholders, so it is more likely someone may have slipped up on their fiduciary duties.
But I do not know for sure. It could have been the instagram owners or old shareholders that got screwed. In any event, it is quite certain that one or both of them did get screwed.
It is not that complicated. Let's say there is X amount of economic benefit from the deal. Initially (i.e. before the series B) that benefit would be shared between Facebook and the initial (i.e., before the series B) shareholders of instagram. Facebook would get the benefit of owning the company minus the purchase price and the investors would get the purchase price.
But after the series B there is another party, the new Instagram shareholders which must also share in that benefit. This means that either Facebook or the initial shareholders or both get less benefit than they would have gotten if the series B had not happened.
So who got less benefit? Well in these cases one just has to ask oneself who is likely to make a decision against their own benefit. And when you look at people making decisions against their own benefit it usually the ones with the longest and remotest chain of fiduciary duties that do it.
So I guessed that it was facebook that might have done it because it has much more and more remote shareholders, so it is more likely someone may have slipped up on their fiduciary duties.
But I do not know for sure. It could have been the instagram owners or old shareholders that got screwed. In any event, it is quite certain that one or both of them did get screwed.