Facebook has raised $500 million from Goldman Sachs and a Russian investor, according to a New York Times report.
The unfinished transaction values Facebook at $50 billion, more than Time Warner, eBay, and Yahoo. It also doubles the net worth of chief executive Mark Zuckerberg to around $15 billion, Forbes reported.
According to the Times report, Goldman will invest $450 million, while Digital Sky Technologies, a repeat Facebook investor from Russia, will put in $50 million. Under the terms of the deal, Goldman can choose to sell $75 million to Digital Sky. Speculators say the deal could push Facebook's rumored 2011 IPO back to 2012, as it stabilizes under the watchful eyes of the world's most profitable investment bank.
Facebook ended 2010 on many high notes: its 26 year-old founder, Mark Zuckerberg, was Time's Person of the Year, it was last year's 'most-searched term;' Glassdoor.com's best-rated employer; it debuted a promising source of revenue, Facebook Deals, along with Community Pages and proprietary e-mail; it successfully trademarked the word 'face;' and at least one top Googler defected to Facebook. See more reasons why PC Mag editor Lance Ulanoff called 2010 "The Year Of Facebook.".
And now, as the company busts out of its Palo Alto seams (TechCrunch reports that Facebook is planning to move into the old Sun Microsystems campus in Menlo Park), Facebook will need a good deal of money to stay at the top of tech's food chain.
"The new money will give Facebook more firepower to steal away valuable employees, develop new products and possibly pursue acquisitions - all without being a publicly traded company," the Times said.
Still, the deal has left many outsiders either dubious or confused.
Seeking Alpha columnist Felix Salmon wrote that the princely investment is worth less than Microsoft's $240 million investment in 2007.
"Facebook's multiples have clearly shrunk from those heady days...today, it's reportedly earning $2 billion a year, which implies to me that this is a cash-out rather than a dilutive offering," Salmon wrote.
Albert Babayev, a quant at the Federal Reserve wrote on his personal blog Alphabias.com, "Bubble!"
"Unless Facebook can expand its current revenue model by many billions, the growth is not sustainable and investors will learn the hard way," he said.
Since its founding in 2004, Facebook has raised approximately $300 million from Microsoft and a consortium of hedge funds. Zuckerberg also apparently turned down buyout offers from Yahoo and Viacom.
Goldman Sachs and Facebook did not respond to requests for comments at press time.