Facebook nets $500 million investment, report says

Social networking
behemoth Facebook has raised $500 million from Goldman Sachs and a Russian
investment firm in a deal that values the company at $50 billion, The New York
Times reported.

Goldman invested
$450 million and Digital Sky Technologies invested $50 million, the newspaper
reported Sunday in its online edition, citing people involved in the
transaction that it did not name. Goldman has the right to sell part of its
stake, up to $75 million, to the Russian firm.

The report said
representatives for Facebook, Goldman and Digital Sky Technologies declined to

The U.S.
Securities and Exchange Commission is reportedly looking into the booming trade
in privately held shares of popular social networking sites. A big reason the
SEC may be curious about the trading of these popular private startups’ shares
is because once a company hits 500 shareholders, it must disclose certain
financial information to the public, even if it hasn’t filed for an initial
public offering.

The Times reported
that Goldman is planning to create a “special purpose vehicle” that
may be able to circumvent the 500 shareholder rule because it would be managed
by Goldman and considered just one investor, even though it could conceivably
be pooling investments from thousands of clients.

Shares of
privately held companies can be traded on private stock exchanges such as
SecondMarket, based in New York, and SharesPost, based in San Bruno,
California. The shares are generally sold by former employees or early
investors in these companies. Only institutional investors or high net-worth
individuals — those worth more than $1 million — can buy the shares.

But for those who
can sell them, the market is on fire. On SharesPost, a completed contract
between a buyer and a seller valued shares of Palo Alto, California-based
Facebook at $25 each. This implies a valuation of nearly $57 billion for the
world’s largest social network, with 500 million-plus users worldwide.

Facebook recently
tightened its privacy settings after criticism that personal information was
being disseminated without users’ knowledge or permission. Founder Mark
Zuckerberg was named Time magazine’s “Person of the Year” and was the
subject of a high-profile movie about Facebook’s creation. Zuckerberg, who owns
about a quarter of Facebook’s shares, is one of the world’s youngest

The newspaper said
the deal may double Zuckerberg’s personal fortune, which Forbes estimated at
$6.9 billion when Facebook was valued at $23 billion.