Facebook is about to get a huge infusion of cash as it has reportedly raised $500 million in funding mostly from Goldman Sachs but with the Russian investment firm Digital Sky Technologies contributing. Facebook is being evaluated at $50 billion, a number we've been hearing lately. What's more, Goldman Sachs is said to be raising an additional $1.5 billion from private investors for Facebook.
The deal hasn't been disclosed yet, but the New York Times cites sources involved with the deal. Facebook has raised $850 million to date, which the new round will overshadow once finished.
Facebook is estimated to be making about $2 billion in yearly revenue, and this with no more than 2,000 employees. With the funds raised so far, it would seem that Facebook doesn't really need another $2 billion to fuel its growth.
Rather, the funding is expected to be used to cash out early investors and employees without the hassle of taking the company public. At a $50 billion valuation, initial and early investors in Facebook should be seeing a huge return.
In fact, even one of the more recent investors, DST, which came in at a valuation of $10 billion, is getting a five fold increase on its initial investment. In the latest round, DST is contributing $50 million of the first $500 million batch, with the option of buying a further $75 million worth of shares from Goldman Sachs.
Along with the shares it bought from employees and the fact that Accel Partners, which was the biggest venture capital investor in Facebook, has sold a large chunk of its shares, DST should now be the biggest outside investor in Facebook.
For Goldman Sachs, the deal makes a lot of sense despite the huge valuation. Some speculate that the cash injection should secure its job as the bank that takes Facebook public, which should generate several hundreds of millions in fees.
What's more, it looks like the Wall Street bank is looking to create a "special purpose vehicle" which would allow some of its biggest clients to invest in Facebook, indirectly, by by buying stakes in the $1.5 billion in funding that Goldman Sachs is expected to raise for the social network.
This round of funding should take some of the pressure off Facebook for taking the company public. The IPO, which some estimated would come this year, could be pushed to 2012. However, Facebook was already under scrutiny from the Securities and Exchange Commission for its rather 'liquid' shares and this new funding round doesn't help.
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