Money buys Facebook friends

Web investor Digital Sky pumps $200 mil into social networking giant

Facebook on Tuesday unveiled a $200 million investment by Digital Sky Technologies, an Internet investment group that has stakes in Eastern European and Russian Web businesses, that will give the firm preferred stock representing a 1.96% stake.

The deal values Facebook at $10 billion.

DST also plans to offer to purchase at least $100 million of Facebook common stock from existing stockholders that would facilitate liquidity for current and former employees' vested shares in the company. Details of the plan are expected to be announced in the summer.

As is Facebook's practice with other recent investors, DST will not be represented on the company's board or hold special observer rights.

"A number of firms approached us," Facebook CEO Mark Zuckerberg said. "But DST stood out because of the global perspective they bring, backed up by the impressive growth and financial achievements of their Internet investments."

The Wall Street Journal had reported that DST likely would get the stake.

The deal led to more debate about Facebook's real value, with some arguing its growth warrants a high price tag while others were reminded of the days of the Internet bubble.

In fall 2007, Microsoft invested $240 million in Facebook for a 1.6% stake, which at the time valued the firm at $15 billion. The lower overall valuation behind the DST deal terms might not surprise many as company valuations across the board have suffered during the global recession and financial crisis. Also, critics continue to question whether Facebook can properly monetize its growing audience.

Zuckerberg on Tuesday signaled no immediate IPO plans for Facebook and called the cash injection "a cushion" and "cash buffer" to support ongoing growth.

Based in London and Moscow, DST holds interests in such Web companies as Mail.ru, Forticom and vKontakte. The firm said its main assets account for more than 70% of page views in the Russian-speaking Internet space, with its social networks being market leaders in more than a dozen countries. (partialdiff)
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