The valuation of social network Facebook has jumped for the second time in as many months, with a reported investment by private equity firm General Atlantic now implying a value of $65bn.
General Atlantic bought a 0.1 per cent stake in the company, or 2.5 million shares, from former employees, according to sources contacted by CNBC news.
In January investment bank Goldman Sachs raised $1.5bn for a three per cent stake in Facebook, including both its own money and placements for clients.
The valuation of Facebook has now more than doubled since July last year, when similar private share placements implied a value of $24bn.
With revenues estimated $800m and net profits at $200m in 2009, that puts the start-up’s price to earnings ratio in the stratosphere, probably at above 100.
As Facebook is rumoured to be squaring up against Google in a bidding war for micro-blogging site Twitter, which could be worth $10bn, and discount site Groupon turning down a $6bn offer from Google, concerns about a new tech bubble are growing.
Facebook is knocking up against the 500 shareholder limit that would require it to start reporting its results publicly like a listed company.
Goldman ended up restricting its share placement to non-US buyers after the media attention surrounding the deal. Under Securities and Exchange Commission rules, underwriters cannot advertise private share placements. Repeated newspaper reports could be construed as advertising, lawyers told Reuters.
Cynics contend that Goldman is manoeuvring itself into a position to manage Facebook’s IPO, which is widely expected within the next two years. Investment bankers acting as underwriters, trying to raise the maximum equity capital for companies, are not supposed to communicate with those working as wealth managers, who are trying to place shares to their clients as cheaply as possible.
But when the two functions are housed under one roof, as at Goldman, it is hard to avoid insinuations of a conflict of interest.
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