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New Facebook Investment Values Site at $10B

Facebook investment
A Russian investment firm has made a $200 million investment in Facebook, valuing the social network at $10 billion, the two companies said today.

Through the transaction, Digital Sky Technologies (DST), a holding company with offices in Moscow and London, acquired a 1.96 percent equity stake in the company in the form of preferred stock. DST also said that it is planning to make an offer to purchase at least $100 million in common stock from current shareholders, a move that would enable current and former Facebook employees to cash in their vested shares in the company.

Facebook said that DST will not secure any seats on the its board or gain special observer rights as a result of the deal.

DST's investment in Facebook is the first major round of financing the company has taken on since October 2007, when Microsoft (NASDAQ: MSFT) paid $240 million for a 1.6 percent stake, giving it a lofty valuation of $15 billion, 50 percent higher than today's deal.

Facebook, which roared past the 200 million user mark in April, is the world's largest social network, having overtaken rival MySpace last August.

With about 70 percent of its members outside the United States, Facebook said DST was an attractive partner, given its extensive investments in Internet firms in Russia and Eastern Europe.

"A number of firms approached us, but DST stood out because of the global perspective they bring," Facebook CEO Mark Zuckerberg said in a statement.

DST's portfolio also includes substantial investments in the social networks Forticom and vKontakte, and Mail.ru, the largest Russian-language Web-mail service.

"Our investment experience in other regions reveals the tremendous value social networking companies create as they redefine how people communicate and interact," DST CEO Yuri Milner said in a statement. "By every important metric -- user growth and engagement, technological innovation and financial performance -- Facebook is on a similar trajectory, though on a much more global scale."

Facebook has said that it is on track to see annual revenues increase 70 percent from last year, and it looks to be cash-flow positive by 2010.

The company continues to mull an IPO, but said that there is no timetable for going public. Today's investment was billed as a means to give the company a financial cushion as it continues its rapid growth.