Facebook secures $200 mil investment

Digital Sky Technologies gets stake in networking site

NEW YORK -- Facebook on Tuesday unveiled a $200 million investment by Digital Sky Technologies, an Internet investment group that has stakes in various 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 is also planning to offer to purchase at least $100 million of Facebook common stock from existing common stockholders that would facilitate liquidity for current and former employees' vested shares in the company. The details of the plan are expected to be announced during the summer.

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

"This investment demonstrates Facebook's ongoing success at creating a global network for people to share and connect," said Facebook CEO Mark Zuckerberg. "We've worked hard to bring more than 200 million people -- 70% outside of the U.S. -- onto Facebook to share with friends, family and co-workers. A number of firms approached us, 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 over the weekend reported that DTS would likely get the stake.

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

In the fall of 2007, Microsoft had 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 may not surprise many as company valuations across the board have suffered amid the global recession and financial crisis. Also, critics continue to question whether Facebook can properly monetize its growing Web audience.

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

Based in London and Moscow, DST holds interests in such Web companies as Mail.ru, Forticom and vKontakte. The firm says its main assets account for more than 70% of all page views in the Russian-speaking Internet world, with its social networks being the market leaders in more than 13 countries.

"Our investment experience in other regions reveals the tremendous value social networking companies create as they redefine how people communicate and interact," said DST CEO Yuri Milner, who used to be CEO of Mail.ru. "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."

Milner's partners in DST, which was founded in 2005, are Gregory Finger, previously head of the Moscow office of hedge fund NCH, and Alexander Tamas, previously co-head of Internet and software coverage in EMEA for the investment banking division of Goldman Sachs.