Goldman Invests $450 Million in Facebook at $50 Billion Valuation

Facebook Inc. has received a new massive round of funding: $450 million from Goldman Sachs and $50 million from Russian investment firm Digital Sky Technologies, the New York Times reports.

Facebook Inc. has received a new massive round of funding: $450 million from Goldman Sachs and $50 million from Russian investment firm Digital Sky Technologies, the New York Times reports. Photo: Spencer E Holtaway/Flickr

Facebook Inc. has raised $450 million from Goldman Sachs and $50 million from Russian investment firm Digital Sky Technologies in a deal that values the company at $50 billion, the New York Times reports. The deal makes Facebook now worth more than such companies like eBay, Yahoo! and Time Warner.

Facebok has already raised over $800 million over five rounds of funding. With this round, the world’s largest social network will have raised over $1.3 billion.

Facebook’s worth has fluctuated between $40 and $50 billion in the secondary markets for the last few weeks. In September, Facebook was worth between $23 billion and $33 billion and in November it was already worth $41 billion, according to SharesPost.

The stake by Goldman Sachs, considered one of Wall Street’s largest names, signals the increasing might of Facebook, which has already been bearing down on web giants like Google Inc.

Goldman has the right to sell part of its stake, up to $75 million, to the Russian firm, according to the NY Times. For Digital Sky Technologies, the deal means its original investment in Facebook, at a valuation of $10 billion, has gone up fivefold.

Goldman’s involvement means it may be in a strong position to take Facebook public when it decides to do so in what is likely to be a lucrative and prominent deal.

As part of the deal, Goldman is expected to raise as much as $1.5 billion from investors for Facebook at the $50 billion valuation, people involved in the discussions said, speaking on the condition of anonymity because the transaction was not supposed to be made public until the fund-raising had been completed.

NY Times also reports that Goldman Sachs is planning to create a “special purpose vehicle” to allow its high-net worth clients to invest in Facebook.

While the Securities and Exchange Commission requires companies with more than 499 investors to disclose their financial results to the public, Goldman’s ‘special purpose vehicle’ may be able get around such a rule because it would be managed by Goldman and considered just one investor, even though it could conceivably be pooling investments from thousands of clients.

However, even as Goldman invests in Facebook, its employees may struggle to view what they invested in. Like those at most major Wall Street firms, Goldman’s computers automatically block access to social networking sites, including Facebook

The new investment will give Facebook more firepower to steal away valuable employees, develop new products and possibly pursue acquisitions. But they also could add pressure on Facebook to go public even as its executives have resisted.

The popularity of shares of Microsoft and Google in the private market ultimately pressured them to pursue initial public offerings.

Mark Zuckerberg, Facebook’s co-founder and chief executive, has brushed aside the possibility of an initial public offering or a sale of the company. At an industry conference in November, he said: “Don’t hold your breath.”

However, people involved in the fund-raising effort suggest that Facebook’s board has indicated an intention to consider a public offering in 2012.

However, the new money comes as the Securities and Exchange Commission has begun an inquiry into the increasingly hot private market for shares in Internet companies, including Facebook, Twitter, the social gaming web company Zynga and LinkedIn, the world’s largest professional networking site.

“When you think back to the early days of Google, they were kind of ignored by Wall Street investors, until it was time to go public,” said Chris Sacca, an angel investor in Silicon Valley who is a former Google employee and an investor in Twitter.

“This time, the Street is smartening up. They realize there are true growth businesses out here. Facebook has become a real business, and investors are coming out here and saying, ‘We want a piece of it.’”

The Facebook investment deal is likely to stir up a debate about what the company would be worth in the public market. Though it does not disclose its financial performance, analysts estimate the company is profitable and could bring in as much as $2 billion in revenue annually.

Facebook Inc. also surpassed Google as the most visited Web site in 2010, according to the Internet tracking firm Experian Hitwise.

Facebook received 8.9 percent of all Web visits in the United States between January and November 2010. Google’s main site was second with 7.2 percent, followed by Yahoo Mail service, Yahoo’s Web portal and YouTube, part of Google.

For Mr. Zuckerberg, the deal may double his personal fortune, which Forbes estimated at $6.9 billion when Facebook was valued at $23 billion. That would put him in a league with the founders of Google, Larry Page and Sergey Brin, who are reportedly worth $15 billion apiece. [via NY Times]

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