Facebook $50 Billion Valuation Means No IPO Anytime Soon
For the second year running “Facebook” was the number one search term on the web. In 2010, a movie “The Social Network” was released, documenting the origins and rise to international domination (save for parts of Asia) of Facebook, as the social network of choice. Late Sunday night the New York Times’ DealB%k , broke a story about Goldman Sachs offering their clients the chance to invest in Facebook, in a deal that values the company at $50 Billion.
According to the DealB%k article… “the email sent to Goldman clients warns recipients who trade in secondary markets where private firms like Facebook trade may want to steer clear of participating because if they opt-in they may receive material non-public information on the unnamed company that will restrict future trading.”
Essentially, private investment in a non-public company gives the investor access to company information, and secondary market information that would exclude the investor from trading in the company are they to go public. Whilst Goldman decline to comment, DealB%k reference a source stating that investors “would be prohibited from selling their shares until 2013”.
On the subject of IPO Zuckerberg has been characteristically unforthcoming, saying in May and November of last year; “…don’t hold your breath”. Of course it wouldn’t be wise to refute the question completely and Zuckerberg is apparently going to be far too busy helping other industries that need to be rethought “and designed around people”; as quoted in the Wall Street Journal, speaking at Web 2.0 in November. Even setting aside the companies agenda, what practical reason do Facebook have to IPO? It seems the condition of the super-star social network is one so healthy, that the usual reasons for IPO just aren’t there.
Normally a company will IPO, so that they can raise funds to attract talent. In the case of the super-star social network (I’m including Twitter and Linkedin and social gaming businesses like Zynga) neither attracting talent, nor raising funds to do so has ever been an issue. Secondly; acquisition funds have never been hard to come by, with many of these social networks and social gaming companies attracting phenomenal first- round investment. So; with no practical, logistical or financial reason to IPO – what is all the money for? What is on the 2011 roadmap for Facebook that requires to free up $500 Million via Goldman Sachs and Digital Sky Technologies (a Russian Investment firm and incumbent investor.)
At Search Engine Land, Greg Sterling considers the likely moves towards mobile, ecommerce and reportedly some big new offices as a direction for growth for Facebook. In addition, Sterling also ponders search, as a possible direction stating “Given the Microsoft relationship and Facebook’s lack of core competency in search it would not seem logical that the company would go there. But the “gravitational pull” of search may ultimately prove too great.” To my mind an aquisition of Blekko would seem the best, most logical direction for Facebook should there be any foray into search. Whatever the immediate future holds for Facebook, 2011 is certainly going to be an exciting year for tech stocks, (social media, social gaming and search specifically).