Investment bank Goldman Sachs and Russian investment firm Digital Sky Technologies (DST) have together infused fresh capital worth $500 million in Facebook, valuing the social networking site to $50 billion.
DST will be investing $75 million while Goldman will bring $375 million. In a previous round of investment, DST had put in $50 million alone, one person familiar with the developments said.
The recent valuation shows a jump in the implied valuation of the company in the secondary market since June 2010 and exceeds Yahoo, Time Warner and Ebay in valuation.
According to a recent report published by internet research company Experian Hitwise, Facebook overtook Google as the most visited website in the US. Insiders say that the revenue for 2010 may exceed $2 billion; however, it’s difficult to verify independently since the privately held company’s financial results are not available in the public domain.
DST first acquired a 2 percent stake in Facebook in 2009 for $200 million and has slowly increased it by purchasing shares from employees to 10 percent since then.
Despite new rules which restrict banks to leverage their balance sheets to pursue ‘lucrative’ deals, Goldman’s buy shows its determination to pursue private equity investments in high growth companies.
Executives of the bank have openly opposed the ‘Volcker Rule’ – a newly enacted US legislation that restricts banks from making ‘proprietary’ investments to avoid Lehman like collapse, saying it’s an integral part of their operations. The bank is raising further $1.5 billion from its wealthy customers and own employees in a parallel move, indicating its faith in the internet company.
Goldman’s involvement at an early stage also gives it the ‘first mover’s advantage’ for providing future underwriting services; whenever the company decides to list and raise money from the public.