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Facebook raises $500 million, worth valued at $50 billion; deal could push site public

January 3, 2011 |  9:41 am

In a sign of its growing influence on Wall Street and the world stage, Facebook has raised $500 million from investment bank Goldman Sachs and Russian Internet investment firm Digital Sky Technologies in a deal that values the company at $50 billion and could propel the popular social-networking site to an initial public offering, analysts say.

Goldman is investing $450 million and Digital Sky Technologies, $50 million. Goldman also will try to raise as much as $1.5 billion from its wealthy clients to invest in Facebook.

"It seems like there is a fair amount of momentum for Facebook to go public now," Standard & Poor's equity analyst Scott Kessler said.

The blockbuster deal will give Facebook more money to develop products, pursue acquisitions and pick off employees from other top Silicon Valley companies. A Facebook spokesman declined comment.

Facebook's skyrocketing valuation already had tongues wagging, with a surge of private trading on the secondary market, in which former employees and early investors unload shares in the privately held company.

That flurry of activity has drawn scrutiny from the Securities and Exchange Commission into private trading of shares in hot young companies such as Facebook. Regulators are concerned the trading has allowed these companies to skirt public-disclosure requirements.

"The implied valuation from the Goldman deal should give some comfort to those investors who have been buying shares in the secondary market with little visibility into the company's actual financials," TCW Group media analyst Anthony Valencia said. "The Goldman investment will definitely give the current valuation an implied stamp of approval from a sophisticated investor."

Facebook has resisted going public. but the popularity of its shares on the secondary market and this latest financing could heighten pressure on the company. Facebook board member Peter Thiel has indicated that the company would consider going public in 2012.

The deal has triggered a fresh round of debate on how much Facebook would be worth on the public market. Facebook does not disclose its financial performance. Analysts estimate the company brought in as much as $2 billion in revenue in 2010.

"I can't think of many private companies that have commanded a $50-billion valuation," Kessler said.

The stake from Goldman Sachs is a major statement from the investment bank, which profited from the dot-com boom, and makes it a leading candidate to take Facebook public as well as pick up mergers and acquisitions, financings and other related business.

"It's a big win win for both companies," Wedbush securities social media analyst Lou Kerner said. “Goldman gets a seat at the table with the most transformational media company of the day, and Facebook will benefit from the advice of the world's smartest and most connected investment bank."

Also looking smart: DST, which had taken heat for investing in Facebook at high valuations. The investment establishes DST as a "global Internet power broker, investor and partner," Kessler said.

The new financing was first reported by DealBook.

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Facebook's value climbs as private trading in the firm surges

-- Jessica Guynn

 

 

 

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