NEW YORK — A reported investment by Goldman Sachs and a Russian investor of $500 million in Facebook is a further sign that the social networking behemoth is becoming a powerful force even outside tech circles, even as the company tries to push off going public as long as possible.
The investment implies that the company is worth $50 billion, according to the report — more than twice the market valuation of Yahoo Inc., though still well below its famous Silicon Valley rival, Google Inc.
The New York Times reported the investment over the weekend, citing unnamed people involved with the deal. Facebook and Goldman Sachs declined to comment Monday.
Russian investor Digital Sky Technologies already has a small stake in Facebook, but the investment from Goldman Sachs is a sign of just how big the Palo Alto, Calif.-based startup has become in the nearly seven years since it was born in CEO Mark Zuckerberg’s Harvard dorm room.
Wedbush Morgan analyst Lou Kerner, who’s been bullish on social media and Facebook in particular, said Facebook is worth the $50 billion the investment implies.
He said that amount is 15 percent less than the going rate on private stock exchanges, and just half of what Kerner thinks Facebook’s shares would trade at if the company were to go public.
Shares of privately held companies can be traded on private stock exchanges such as SecondMarket and SharesPost. 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.
On SharesPost, a completed contract between a buyer and a seller valued shares of 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.
While the market for Facebook’s shares is hot, it’s not guaranteed that the company’s shares would be worth on the public market what they go for in private exchanges.
Not that Facebook is in any rush to go public. Zuckerberg, 26, has long been coy about a possible initial public offering, recently telling CBS’ “60 Minutes” that he doesn’t see selling the company or going public as an end goal, as a lot of people seem to.
“(It’s) like you win when you go public. And that’s just not how I see it,” he said on Dec. 5.
There are many reasons for Facebook to put off an IPO, a big one being that it doesn’t need the money, as the latest investment shows. Companies go public to get access to capital, and Facebook clearly has access to capital, Kerner said.
Becoming public also requires a “significant time commitment” from a company’s senior management that they could otherwise spend running the company, he added. Zuckerberg has been deeply involved with running Facebook since its founding and shows no signs of wanting to give that up to cash out. He’s even pledged to give away at least half of his wealth along with a slew of much older billionaires such as Carl Icahn and Barry Diller.
Facebook hasn’t said whether it’s profitable, though in 2009 it said it was “cash-flow positive,” meaning it was bringing in more money than it was spending.
Research firm eMarketer estimates that Facebook generated $1.29 billion in online ad revenue in 2010 and will rake in $1.76 billion in 2011.