January 03, 2011, 11:44 AM — The $500 million investment in social networking site Facebook led by Goldman Sachs accomplishes many things.
First, as the New York Times -- which reported the deal -- notes:
(Also see: The quasi-secret world of trading private shares)
The new money will give Facebook more firepower to steal away valuable employees, develop new products and possibly pursue acquisitions — all without being a publicly traded company.
A formidable war chest never hurts, and neither does buzz. Facebook amassed plenty of both over the weekend: In addition to the Goldman Sachs deal (made in conjunction with a Russian investor), web traffic measurement firm Experian Hitwise reported that Facebook passed Google's main page to become the most-visited web site in 2010.
The funding round values Facebook at $50 billion, not far off from the $56 billion value recently attributed it by SharesPost, an exchange facilitating the buying and selling of shares of companies that are not public. As I noted in a recent post about the market for private shares, that kind of valuation makes Facebook a valuable company, though not in the same league as Apple or Google, which, respectively, are four and three times more valuable.
And it's in the market for private shares where I expect to see the Facebook funding deal have another immediate impact. Now is the perfect time for shareholders -- whether early investors or Facebook employees -- to cash out. Expect the already hot private-share market to heat up even more, and expect that to draw even more scrutiny from the Securities and Exchange Commission, which already is asking questions about the buying and trading of private shares.
Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.