Recently, Facebook, probably the fastest growing social network in the world, struck up a deal with Goldman Sachs (a large American investment company) and a Russian investment firm. Although these two companies together are only providing Facebook with $500 million dollars (450 from Goldman and 50 from the Russian firm) other companies are leveraged into the deal by Goldman Sachs’ deal bringing in a whopping $2 billion.
This is an internationally important deal for a few reasons. First of all, Goldman financial experts project that Facebook will soon be worth $50 billion and later potentially much more. Also, this new sum of money provides Facebook with the rescores they need to expand and put them in direct competition with Google and other search engines.
One of the less known details of this story is that initially, a group within Goldman Sachs called Goldman Sachs Capitol Partners, didn’t care for the Facebook investment. The two main reasons for this were the questionable $50 billion estimate and that this particular group is known for more long term investments in larger companies. They had said, though, that if this deal looked like an easy homerun, they would have changed their philosophy. This is worrying some of Goldman’s wealthier clients who are concerned that if Goldman Sachs Capitol Partners, one of Goldman’s better funds decided against it, should they make the same bet. Another hit on Facebook’s $50 billion dollar value is TIME Magazine. Although they were the one to name Facebook CEO Mark Zuckerberg person of the year, they don’t even believe the extreme value. They are also very critical of Facebook’s ability to reach/exceed that value…ever. According to most sources, Facebook has a revenue of $2 billion and a profit of $100-200 million so where this $50 billion comes from, no one really knows.
Another signature of Goldman’s is taking fragments of companies and bringing them public. This has already been done for companies such as eBay and Ford Motor. Facebook CEO Mark Zuckerberg was already talking about going public, but this will most likely be the final straw. Another result of this deal is the possibility that Facebook employees will become Goldman Sachs clients.
The single largest threat to the social networking giants deal is the S.E.C., the Security Exchange Commision, (not south eastern conference). They, as many others believe that the need to disclose economic data to the public is being avoided. Although the rule is 500+ shareholders to require information release, this deal could possibly give Facebook thousands of shareholders. The way it would work is Goldman Sachs would buy $450 million in Facebook meaning they would be the lone shareholder, but they would dish the stock out to possibly thousands of employees and top clients. All in all, the Facebook deal with Goldman Sachs would pump $2 billion more dollars into the already ballooning Facebook. This massive sum of money would bring Facebook Founder Mark Zuckerberg into the range of Google Sergey Brin and Larry Page (each values at about $10-15 billion dollars).
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