Last updated: January 4, 2011 12:41 am

Goldman deal values Facebook at $50bn

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Facebook has raised $500m of an anticipated $2bn in new funding from Goldman Sachs and other investors in a deal that values the dominant social network at around $50bn.

That valuation implies Facebook is now worth more than Time Warner or Yahoo and almost twice as much as Google at the time of its 2004 initial public offering. It is also almost double the amount indicated by private sales of Facebook stock on secondary markets just five months ago.

People involved in the deal said on Monday that Goldman was providing $375m and Russia’s Digital Sky Technologies $125m. Goldman has also formed a special fund to raise an additional $1.5bn from outside investors, these people said.

All the money will go to Facebook itself and none to staff, who have been able to take part in some past transactions. With an estimated 24 per cent stake in the company, the company’s founder, 26-year-old Mark Zuckerberg, would have a paper fortune of $12bn.

Facebook passed Google as the most-visited website in the US in 2010, according to research firm Experian Hitwise. The deal puts a value of $100 on each of Facebook’s 500m users. People close to Facebook said that it could generate $2bn of revenue this year. By contrast, last year Time Warner had $26bn in revenues.

Goldman’s role puts it in prime position to lead an IPO that Facebook executives have said could come in 2012. Facebook, Goldman and DST all declined to comment.

DST bought a 2 per cent stake in Facebook for $200m in 2009 and is understood to have increased its holding to about 10 per cent by buying shares from Facebook employees before its latest investment.

Facebook began its latest fundraising by speaking to Moscow-based DST, which has many Goldman veterans on its staff, and then expanded the talks to include the bank, the people involved said.

Regulators have expressed fears about the big secondary market for private company shares. Securities and Exchange Commission rules require companies with 500 investors or more to make public disclosures, and it has begun looking into whether some of the most heavily traded private companies are improperly avoiding that requirement.

In Goldman’s view it will act as a single investor, as venture capital firms act on their own even if they have hundreds of limited partners, according to people familiar with the deal.

Goldman’s decision to invest its own funds in Facebook underlines its determination to continue to pursue lucrative private equity investments despite new regulations aimed at limiting banks’ use of their balance sheets.

In earlier interviews, DST executives said that they saw their mission as getting as much cash as desired to its companies whenever those firms wanted it. DST is also participating in a big new round of financing for Groupon , which is aiming to take in $950m and is likely to go public this year.

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