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Will Goldman Sachs Take Facebook Public This Year?

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My how big Facebook has grown, lately.

Goldman Sachs (NYSE: GS  ) is investing $450 million in the fast-growing social networking website, according to The New York Times' DealBook blog. Russia's Digital Sky is kicking in another $50 million, in a deal that values Facebook at a whopping $50 billion.

Yes, Goldman Sachs is throwing a lot of money at Facebook, but it's for a stake that amounts to less than 1%.

Just a week ago, cynics were laughing at small-fry private investors snapping up employee shares through the SharesPost marketplace that valued Facebook at an incredible $42.37 billion. Now we have the presumably whip smart Goldman Sachs buying in at an even higher price?

If this sounds too good to be true, it may be.

Does anyone remember when Microsoft (Nasdaq: MSFT  ) paid $240 million for a 1.6% stake in the fledgling site? It pegged Facebook with a $15 billion price tag that seemed preposterous at the time. This was the same Facebook that was on the fence a year earlier when Yahoo! (Nasdaq: YHOO  ) reportedly offered $1 billion to swallow Facebook whole.

Facebook's growth warrants the ever-percolating valuations, but isn't $50 billion a bit much?

Well, Microsoft had an incentive to buy into Facebook's $15 billion sticker price three years ago. It was able to expand its advertising on Facebook globally as part of the deal. Now that Goldman Sachs is trumpeting the $50 billion price -- but actually buying a percentage stake that's even smaller than Microsoft's nibble -- don't be surprised if Goldman Sachs gets tapped as lead underwriter when Facebook goes public.

DealBook speculates that an IPO may take place in 2012, but I think Facebook will get out while the going is still good.

For starters, it certainly does appear that growth is decelerating -- at least when it comes to the number of subscribers.

I've heard some recent reports declare that Facebook is a site with 600 million members, but it's not quite officially there yet.

CEO Mark Zuckerberg has made it a point to blog about every major milestone in his company's speedy history. He hasn't blogged since hitting 500 million this past summer.



Aug. 26, 2008

100 million

April 8, 2009

200 million

Sept. 15, 2009

300 million

Feb. 4, 2010

400 million

July 21, 2010

500 million


See the problem? It took less than five months to go from 300 million to 400 million active users. It took five and a half months to get to 500 million, and that's pretty much where we are now on the calendar. It would be a shock if Zuckerberg doesn't blog about 600 million in the coming days, but we're still talking about decelerating growth on a percentage basis.

This should not suggest that Facebook has peaked. Active users may be using the site more. Facebook is no doubt continuing to improve the monetization of its page views. Facebook has gone where no Friendster or News Corp.'s (NYSE: NWS  ) MySpace has gone before, but there's no point in being greedy.

Going public would help elevate the already enormously popular brand. Now that Goldman Sachs has the company's ear -- or whatever 1% in body parts will get you -- it's time to get this IPO rolling.

Is Facebook peaking? Is it worth more or less than $50 billion? Share your thoughts in the comment box below?

Microsoft is a Motley Fool Inside Value choice. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz remembers when social networks were an offline endeavor. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.

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  • Report this Comment On January 03, 2011, at 5:15 PM, xetn wrote:

    This link to this article is GSK but ends up ag GS. Whats up with that?

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