Facebook affirms $500M round, adds $1 billion

Ronny Kerr · January 24, 2011 · Short URL: https://vator.tv/n/1634

At valuation of $50 billion, Facebook raises $1.5 billion from DST and Goldman Sachs

I can’t even remember the last time Facebook issued a press release, but then, this isn’t your everyday news.

Facebook announced late Friday that it has raised $1.5 billion at a valuation of approximately $50 billion.

$500 million of the total new funding is the very same that sources leaked in December, but Facebook is just confirming now. As was rumored, Russian investment firm Digital Sky Technologies (DST), The Goldman Sachs Group, Inc., and funds managed by Goldman Sachs invested $500 million in Facebook Class A common stock at a $50 billion valuation.

The extra $1 billion investment also came from Goldman Sachs, which completed an oversubscribed offering to its non-U.S. clients.

"Our business continues to perform well, and we are pleased to be able to bolster our cash position with this new financing," said Facebook CFO David Ebersman. "With this investment completed, we now have greater financial flexibility to explore whatever opportunities lie ahead."

It’s a classic business decision that every startup company should learn well: whether you’re just starting out whether you’re as big as Facebook, always take money when it’s offered to you because you never know when you’ll need it. It was DST and Goldman Sachs that originally approached Facebook, not the other way around, so we know that Facebook already had considerable cash in the bank. Facebook sees the deal, according to the release, as an “attractive opportunity to bolster its cash reserves and increase its financial flexibility with limited dilution to existing shareholders.”

Facebook “made a business decision” to limit the Goldman Sachs non-U.S. portion of the deal to $1 billion, though it could have easily accepted the maximum $1.5 billion offering.

More interestingly, Facebook has now addressed widespread confusion about how the company would respond to a rule requiring private companies with more than 500 shareholders to disclose financial information publicly. Don’t say IPO. Mark Zuckerberg, more than your ordinary chief executive or founder, is obsessed with retaining creative control over the development of Facebook, and a public offering would dilute that control. Instead, as the release notes quite contentedly, Facebook expects to start filing public financial reports no later than April 30, 2012.

So when’s that IPO coming? Your guess is as good as mine.