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Russians buy Facebook share
By Barbara Ortutay |
May 28, 2009, Thursday
|
Print Edition
Print Edition
FACEBOOK Inc is getting a US$200 million investment from a Russian Internet investor that values the social networking company at US$10 billion, even though it has yet to turn a profit.
The investment gives Digital Sky Technologies a nearly 2 percent stake in Palo Alto, California-based Facebook's preferred stock. Digital Sky won't get a board seat.
The US$10 billion valuation for Facebook is less than the US$15 billion value implied in 2007, when Microsoft spent US$240 million for a 1.6 percent stake in the company, even though Facebook has substantially grown since then. However, Facebook's own appraisal after the Microsoft deal gave the company a market value of about US$3.7 billion, according to details revealed in a legal settlement.
The latest investment does not necessarily compare with what the company's common shares would be worth on the open market.
That would be determined if the company were to go public.
Chief Executive Mark Zuckerberg said an IPO was "not something we are rushing toward." He called the Digital Sky investment a "good cash buffer" to support its growth. Facebook now counts 200 million users, 70 percent of whom live outside the United States.
The company says it has been profitable by one measure - earnings before interest, taxes, depreciation and amortization for the past five quarters - and the company expects to generate positive cash flow in 2010. Zuckerberg says Facebook will grow revenue by 70 percent this year.
Yuri Milner, Digital Sky's chief executive, said he is "confident that Facebook has the potential to be one of the most valuable Internet companies globally." In addition to the US$200 million preferred stock investment, Digital Sky also plans to offer to buy at least US$100 million in common shares from existing shareholders.
Based in London and Moscow, Digital Sky also holds a stake in vKontakte, a Russian online social network far more popular in that country than Facebook.
The investment gives Digital Sky Technologies a nearly 2 percent stake in Palo Alto, California-based Facebook's preferred stock. Digital Sky won't get a board seat.
The US$10 billion valuation for Facebook is less than the US$15 billion value implied in 2007, when Microsoft spent US$240 million for a 1.6 percent stake in the company, even though Facebook has substantially grown since then. However, Facebook's own appraisal after the Microsoft deal gave the company a market value of about US$3.7 billion, according to details revealed in a legal settlement.
The latest investment does not necessarily compare with what the company's common shares would be worth on the open market.
That would be determined if the company were to go public.
Chief Executive Mark Zuckerberg said an IPO was "not something we are rushing toward." He called the Digital Sky investment a "good cash buffer" to support its growth. Facebook now counts 200 million users, 70 percent of whom live outside the United States.
The company says it has been profitable by one measure - earnings before interest, taxes, depreciation and amortization for the past five quarters - and the company expects to generate positive cash flow in 2010. Zuckerberg says Facebook will grow revenue by 70 percent this year.
Yuri Milner, Digital Sky's chief executive, said he is "confident that Facebook has the potential to be one of the most valuable Internet companies globally." In addition to the US$200 million preferred stock investment, Digital Sky also plans to offer to buy at least US$100 million in common shares from existing shareholders.
Based in London and Moscow, Digital Sky also holds a stake in vKontakte, a Russian online social network far more popular in that country than Facebook.
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