Goldman Invests in Facebook at $50 Billion Valuation
Facebook, the popular social networking site, has raised $500 million from Goldman Sachs and a Russian investor in a deal that values the company at $50 billion, according to people involved in the transaction.
Context & Ripple Effects
An active secondary market had already developed for shares in Facebook, Twitter, Zynga, and LinkedIn, while Facebook was also reported as 2010's top search term for a second consecutive year. The investment gives that private-market interest a prominent institutional valuation reference.
For Facebook, the transaction pairs a large cash infusion with Goldman Sachs's participation, making the company a clearer test case for how late-stage internet companies can finance growth before a public listing.
First-order effects
- Facebook receives $500 million in new capital at a $50 billion valuation, while Goldman Sachs and the Russian investor obtain an equity position at that price.
- The $50 billion transaction price establishes a high-profile benchmark for Facebook shares already changing hands in private markets.
Second-order effects
- Private-market investors in Twitter, Zynga, and LinkedIn gain a fresh comparable for pricing fast-growing internet companies that have not listed publicly.
- Goldman Sachs's entry increases pressure on other financial intermediaries to offer affluent clients access to private-company stakes rather than wait for an IPO.
Third-order effects
- If large institutions continue to fund mature private internet companies, secondary trading and late-stage financings can shift some price discovery and investor liquidity away from public markets.
- The deal points toward a financing model in which the most sought-after consumer internet platforms can remain private longer while drawing capital normally associated with public equities.
The trend: Late-stage consumer internet companies are turning private secondary markets and institutional placements into an alternative route to capital and liquidity before an IPO.