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Another $500 Million for Facebook? OK, This Is Getting Ridiculous

Posted by: Rob Hof on October 25, 2007

And I don’t mean ridiculous for Facebook, which might as well take any money that’s green. But I can’t understand why two hedge funds would invest an additional $500 million in Facebook, on top of Microsoft’s $240 million announced yesterday, as Elizabeth Corcoran reports on a Forbes blog. Microsoft gets multiple strategic benefits from its investment, as I wrote yesterday. But how on Earth can any self-respecting hedge fund expect to get a reasonably near-term return on a $15 billion valuation on a company with an expected $150 million in sales this year? For all of Facebook’s evident momentum and utility, a $15 billion exit via acquisition or initial public stock offering is iffy enough at this point. To get a return, the funds would have to see that valuation rise significantly higher than that, right? Sorry, I don’t get it. Neither do a lot of other people. Of course, Facebook hasn’t announced this additional funding yet, so we’ll have to see if it actually happens.

Update: Larry Aragon at Private Equity Hub says the report about the hedge funds may not be true. If so… never mind.

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Reader Comments


October 25, 2007 07:28 PM

Let's put this in perspective...Microsoft invested $150M in Apple and $200M in BestBy back in 2000 (that bought an exclusive to push MSM, they outbid AOL). Here we are in 2007 and Microsoft invests a paltry $240M in Facebook and everyone goes nuts. Take inflation into account and what's that investment in todays dollars...peanuts.

Rob Hof

October 25, 2007 11:47 PM

PXLated, I don't mean the money itself is ridiculous--as I said, it's pocket change for Microsoft, which gets a number of strategic benefits for its relative pittance. It's that hedge funds, or anyone without a strategic imperative for a piece of Facebook, would invest at a $15 billion valuation today.

Brandon J. Mendelson

October 28, 2007 10:31 AM

Bubble 2.0. I don't understand how anyone finds these social networking sites to be worth any money. They all eventually flatten out in terms of growth and revenue, look at My Space.

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