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Sunday Times STLive By Reuters, 2011-05-01

Proposed share sale values Facebook at $70-billion

A Group of Facebook shareholders is seeking to sell $1-billion worth of shares on the secondary market, a move that would value the company at more than $70-billion, according to five sources .

It would represent one of the largest transactions of Facebook shares to date and points to a growing wariness among early-stage investors and employees who fear Facebook's market valuation cannot keep pace with its growth.

The sellers have lowered their price after previously trying to sell shares at a price that valued the company at $90-billion. But buyers baulked.

"At the current valuation it is really hard to justify the investment," said Sumeet Jain, partner at venture capital firm CMEA Capital.

The deal, which includes stock held by employees, still needs approval from executives, including chief executive Mark Zuckerberg and chief financial officer David Ebersman, according to two sources.

Facebook declined to comment.

Investors, ranging from venture capital firms and rich individuals to investment banks, have scrambled to get a piece of the company before its expected IPO next year.

Facebook raised $500-million from Goldman Sachs Group, and Russia's Digital Sky Technologies, for instance, giving it a market value of $50-billion.

Weeks later, private equity firm General Atlantic piled into the company, valuing it at $65-billion, according to CNBC.

Tim Draper, the venture capital partner who founded Draper Fisher Jurvetson, said this month he recently looked at buying Facebook shares, but passed because they were too expensive.



One wealthy person, who has fielded calls for the past month involving Facebook pitches in the range of $200-million to $1-billion, is also sitting on the sidelines.

Created in a Harvard University dorm room in 2004, Facebook rocketed from an online directory created for college students to the world's top social network with more than 500million members worldwide.

The company's astounding growth and popularity have put some of the internet's biggest guns on notice - including Google - and have made it the darling of investors seeking to stake out claims in private companies before they go public.

Facebook earned $355-million in net income in the first nine months of 2010 on revenue of $1.2-billion.

It is one of a handful of internet companies including Twitter, Groupon and Zynga whose soaring valuations recall the heady days of the late '90s.