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January 3, 2011
Social networking behemoth Facebook has raised $500 million from Goldman Sachs and a Russian investment firm in a deal that values the company at $50 billion, The New York Times reported.
Goldman invested $450 million and Digital Sky Technologies invested $50 million, the newspaper reported Sunday in its online edition, citing people involved in the transaction that it did not name. Goldman has the right to sell part of its stake, up to $75 million, to the Russian firm.
The report said representatives for Facebook, Goldman and Digital Sky Technologies declined to comment.
The U.S. Securities and Exchange Commission is reportedly looking into the booming trade in privately held shares of popular social networking sites. A big reason the SEC may be curious about the trading of these popular private startups' shares is because once a company hits 500 shareholders, it must disclose certain financial information to the public, even if it hasn't filed for an initial public offering.
The Times reported that Goldman is planning to create a "special purpose vehicle" that may be able to circumvent the 500 shareholder 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.
Shares of privately held companies can be traded on private stock exchanges such as SecondMarket, based in New York, and SharesPost, based in San Bruno, California. The shares are generally sold by former employees or early investors in these companies. Only institutional investors or high net-worth individuals — those worth more than $1 million — can buy the shares.
But for those who can sell them, the market is on fire. On SharesPost, a completed contract between a buyer and a seller valued shares of Palo Alto, California-based Facebook at $25 each. This implies a valuation of nearly $57 billion for the world's largest social network, with 500 million-plus users worldwide.
Facebook recently tightened its privacy settings after criticism that personal information was being disseminated without users' knowledge or permission. Founder Mark Zuckerberg was named Time magazine's "Person of the Year" and was the subject of a high-profile movie about Facebook's creation. Zuckerberg, who owns about a quarter of Facebook's shares, is one of the world's youngest billionaires.
The newspaper said the deal may double Zuckerberg's personal fortune, which Forbes estimated at $6.9 billion when Facebook was valued at $23 billion .
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