Facebook Raises $1.5 Billion, Valuing Social-Network Site at $50 Billion
Facebook Raises $1.5 Billion
Tony Avelar/Bloomberg
Facebook headquarters in Palo Alto, California.
Facebook headquarters in Palo Alto, California. Photographer: Tony Avelar/Bloomberg
Jan. 21 (Bloomberg) -- Lou Kerner, a social-media analyst at Wedbush Securities Inc., talks about $1.5 billion in financing raised by Facebook Inc., owner of the world's most popular social-networking site. Goldman Sachs Group Inc. -- and funds managed by the firm -- along with Digital Sky Technologies invested $500 million in Facebook in December, valuing the company at $50 billion, Facebook said today in a statement. Goldman Sachs has also completed an oversubscribed offering to its non-U.S. clients in a fund that invested $1 billion, also valuing the company at $50 billion. Kerner talks with Carol Massar, Julie Hyman and Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Facebook Inc., owner of the world’s most popular social-networking site, raised $1.5 billion in a financing round led by Goldman Sachs Group Inc., less than the $2 billion it could have received.
Goldman Sachs -- and funds managed by the firm -- along with Digital Sky Technologies invested $500 million in Facebook in December, valuing it at $50 billion, Facebook said in a statement. Goldman Sachs today also completed an oversubscribed offering to its non-U.S. clients in a fund that invested $1 billion, similarly valuing the company at $50 billion.
“Under the transaction’s terms, Facebook had the option to accept between $375 million and $1.5 billion from the Goldman Sachs overseas offering, at the discretion of Facebook,” the company said in the statement. “While the offering was oversubscribed, Facebook made a business decision to limit the offering to $1 billion.”
Facebook, which is hiring more staff and expanding its service, said the investment provided an opportunity to boost its cash reserves and increase its financial flexibility with limited dilution to shareholders. The company may have taken less than the full $1.5 billion because the value of the shares is rising in private markets and it won’t be difficult to raise money in the future, said Lou Kerner, an analyst with Wedbush Securities Inc. in New York.
Growing Stature
“The Goldman investment in the company, I think, was a wake-up call to the entire world that Facebook is a force to be reckoned with,” he said. “The increase in stature is going to have significant benefits for the company going forward.”
The company said it has no immediate plans for the proceeds from the transaction. Facebook will “continue investing” to expand operations, it said.
Jonathan Thaw, a Facebook spokesman, declined to comment beyond the company’s statement.
Goldman Sachs changed how it raised money for the non-U.S. investment in Facebook, the bank said earlier this week. It halted the offering for U.S. investors after the deal received “intense media attention” over concerns it would violate U.S. rules that limit marketing of private securities.
Instead, the sale, first reported in the New York Times on Jan. 2, was restricted to investors outside the U.S.
Most-Visited Website
The investment gives Goldman Sachs an entry into a social- networking service that’s threatening established Internet companies such as Google Inc. and Yahoo! Inc. Facebook surpassed Google to become the most-visited website in the U.S. in 2010, according to New York-based Internet tracker Experian Hitwise.
Facebook generated $1.2 billion in revenue and $355 million in profit during the first nine months of 2010, according to a person who had reviewed a financial document sent to investors. That compares with sales of $777 million and profit of more than $200 million in all of 2009.
The company will be reporting more in the future. Even before the investment from Goldman Sachs, Facebook had expected to pass 500 shareholders at some point in 2011, the company said. It plans to begin filing public financial reports no later than April 30, 2012.
“Our business continues to perform well, and we are pleased to be able to bolster our cash position with this new financing,” David Ebersman, Facebook’s chief financial officer, said in the statement. “With this investment completed, we now have greater financial flexibility to explore whatever opportunities lie ahead.”
To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net.
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.
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