Archive for January, 2011

Facebook lands $500 million from Goldman Sachs and Digital Sky Technologies

Monday, January 3rd, 2011

Mark Zuckerberg and Co. certainly know how to start the year off right. Initially reported by the New York Times, Palo Alto, CA. based Facebook has recently received an additional $500 million from Goldman Sachs and Russian investor Digital Sky Technologies. While Facebook does not disclose their financials, this deal now places the social networking site with a valuation of $50 billion, a figure that puts them on top of eBay, Yahoo!, and Time Warner. A larger number for sure, but not out of the question, as Facebook’s valuation has been on the steady increase, as Septembers’ numbers placed the company between $23 and $33 billion, while November saw numbers in the neighborhood of $41 billion.

The question is…what is all the money for? The Times indicates that by getting Goldman Sachs involved, this could signal a potential IPO. You’ll remember, the same interest and pressures have been applied to former tech and internet properties Microsoft and Google, ultimately resulting in initial public offerings. And although Zuckerberg has brushed aside a public offering, “Don’t hold your breath,” industry insiders have their sights set on a 2012 Facebook-on-the-trading-floor.

And what’s fueling this speculation? As part of Goldman’s investment in Facebook
The company agreed to raise an additional $1.5 billion for Facebook. And how? Here’s where things get rather interesting. Not a page out of Goldman’s normal playbook, the investment firm will create a “special purpose vehicle” that will allow high-net worth (read: already quite wealthy) “clients” to invest in Facebook. Ok, so far, so good, however, this “special purpose vehicle” is an interesting move to skirt an S.E.C. ruling that requires companies with more the 499 investors to publically disclose their financials. By packing investors in under the Goldman banner, Facebook will be able to consider this collective as One investor.

The news couldn’t have arrived at a better time for Facebook. Experian Hitwise recently released numbers that put Facebook on top of Google for overall most visited site of 2010, garnering 8.9 percent of all U.S. web traffic between January and November 2010. As a point of comparison, Google captured 7.2 percent of all U.S. web traffic during the same time period.

One interesting note that New York Times journalists Andrew Ross Sorkin and Evelyn M. Rusli point out: even when Goldman Sachs employees are advising some investors who might fall under the “special purpose vehicle” banner, theoretically, they’d be advising in the dark, as Goldman, like many other Wall Street investment houses, automatically block access to social networking sites; first and foremost – Facebook.