Goldman Reportedly Invests Big In Facebook

Privately held Facebook has apparently scored a big investment. The New York Times reports that Goldman Sachs and a Russian firm have put together a $500 million investment that values the social networking site at $50 billion.

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MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

ROBERT SIEGEL, host:

I'm Robert Siegel.

And it's time for All Tech Considered.

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SIEGEL: First, today, that ubiquitous company, Facebook, has gotten a major vote of confidence worth a lot of money. Goldman Sachs is investing almost half a billion dollars in the social networking site. The news was first reported by The New York Times. The deal adds to considerable speculation about Facebook going public. And it suggests the company would be worth about $50 billion if its stock were sold in the public markets.

NPR's Jim Zarroli has our story.

JIM ZARROLI: It's pretty obvious why Goldman Sachs wants to invest in Facebook. It's one of the most heavily visited websites on Earth and it's potential for profit is enormous. And there's another lure for Goldman. If and when Facebook decides to go public, Goldman will be sitting pretty, says Internet analyst Greg Sterling.

Mr. GREG STERLING (Internet Analyst): It virtually guarantees that Goldman will be the lead firm or the firm to take the company public. And it could make a tremendous amount of money in that context.

ZARROLI: Until now, it hasn't been so clear that Facebook is eager to go public. Some of the fastest growing Internet companies like Twitter and Groupon are still privately held. That's probably due in part to the fact that the stock market was so weak after the financial crisis. But now, stocks have rebounded and a lot of technology companies are still holding back.

Scott Kessler is an Internet analyst at Standard and Poor's.

Mr. SCOTT KESSLER (Internet Analyst, Standard and Poor's): The reality is that the IPO markets, specifically for Internet companies has been, I'd say, curiously quiet.

ZARROLI: And Facebook is the most notable holdout. Not long ago, CEO Mark Zuckerberg was asked in a "60 Minutes" interview whether an IPO was in the wings. He answered, maybe. For Zuckerberg and his investors, an IPO would mean a huge personal windfall. But the company itself would face much more scrutiny from federal regulators. Here was venture capitalist Jim Breyer, one of Facebook's biggest investors, at a conference in Germany last year.

Mr. JIM BREYER (Venture Capitalist): We like the fact that we're private. I'm on several public boards and I can promise you that we spend more time in accounting, litigation and Sarbanes-Oxley updates than often on product strategy.

ZARROLI: To minimize the regulatory scrutiny they face, companies like Facebook are required to keep their total number of investors at a minimum. But the clock may be ticking. Right now, if Facebook investors want to sell their shares, they need to go to secondary markets not accessible to the public. The Securities and Exchange Commission is reportedly investigating the way these secondary markets operate. And that could end up forcing companies like Facebook to be more transparent.

Then, too, despite Facebook's valuation, its revenues are still small compared to Internet giants like Google and Amazon. If Facebook is to live up to its potential, it needs to capitalize on some of the growth areas in digital media like mobile phone apps.

Again, Scott Kessler.

Mr. KESSLER: Clearly the so-called smartphone revolution has contributed significant additional demand for not just Facebook services, but also additional offerings from the company that, you know, probably are just kind of twinkles in their eye at this point.

ZARROLI: Going public would give Facebook access to a huge pool of capital it needs to invest in new technologies, and also to continue expanding overseas. In the long run, that may tempt the company to plunge into the IPO market, even though such a move would come with tradeoffs.

Jim Zarroli, NPR News, New York.

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