HONG KONG ¡ª News that Goldman Sachs has taken a $450 million stake in Facebook in a deal that puts a $50 billion valuation on the fledgling company raises interesting and somewhat troubling questions beyond the immediate gawping and jaw-dropping headlines that a spotty-faced Harvard dropout aged 26 is not only Time¡¯s ¡°Person of the Year,¡± but is also worth $12 billion plus (based on Mark Zuckerberg¡¯s 24 percent stake in Facebook).
Is Facebook really worth $50 billion, near the market value of Boeing, or more than the value of Goldman¡¯s rival Morgan Stanley? It is difficult to know when Facebook has not made any accounts public. According to the stock-sale memorandum prepared by Goldman, Facebook¡¯s 2009 revenues were $775 million and profits were $200 million. In 2010, revenues rose to $2 billion, and profits to $500 million, so the valuation is 25-times revenue (against Google¡¯s valuation of seven-times revenue).
The very fact that Goldman Sachs and Facebook had ¡°friended¡± each other prompted other rich people to consider buying Facebook shares. San Francisco newspapers reported earlier this month that the private shares market Sharespost sold 165,000 shares for $25 each in a ¡°significantly oversubscribed auction,¡± valuing the company at $56 billion. A well-known analyst was quoted as saying that by 2015 Facebook could easily be worth $200 billion.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.