Facebook Gets $200M Cash Infusion
Facebook, whose dizzying growth in recent years has been rumored to put a growing strain on its finances, has sold a stake to investment firm Digital Sky Technologies (DST) for US$200 million.
DST, which invests mostly in Internet companies from Russia and Eastern Europe, has acquired Facebook preferred stock equivalent to a 1.96 percent equity stake.
The investment gives Facebook a $10 billion valuation, a third less than the value of the social-networking company when it sold a 1.6 percent stake for $240 million to Microsoft in October 2007.
In addition, DST plans to offer to purchase "at least" $100 million of Facebook common stock from existing common stockholders, the companies said Tuesday.
This would "facilitate liquidity for current and former employees' vested shares in the company," DST and Facebook said, adding that eligible participants would be notified of the plan details this summer.
The investments will not get DST a seat on Facebook's board or grant it special observer rights.
In November of last year, Facebook CEO Mark Zuckerberg said the company wasn't starved for money, as some pundits were suggesting at the time.
He also said Facebook officials didn't obsess about the $15 billion valuation of the Microsoft investment and didn't feel pressure to live up to it by modifying the company's business strategy.
Facebook's ad business was generating a healthy annual revenue of "hundreds of millions of dollars," Zuckerberg said at the Web 2.0 Summit in San Francisco.
Of course, since then, Facebook's growth has continued unabated, while online advertising's growth has slowed down considerably, affecting to different extents all major players, including Google, Yahoo and AOL.
Facebook was approached by various potential investors but chose DST, which is based in London and Moscow, because its international expertise meshes well with the fact that 70 percent of Facebook's members are located outside of the U.S., the companies said.
Facebook will hold a press conference on Tuesday to further discuss DST's investment.