Facebook to Engineer its Own $60 Billion Valuation

It's pretty nice to make your own rules. When it comes to valuation, a number of factors come into play, and how the rest of the world perceives you is one of them. If potential investors, bankers and analysts don't think your company will meet their expectations, your optimistic self-assessment will be worthless. Clearly, Facebook doesn't have this problem. The company was valued at $50 billion in its last round of financing, involving $450 million from Goldman Sachs and another $50 million from Digital Sky Technology ... not to mention a $1 billion equity investment opportunity for Goldman's clients. A recent financial decision by the white-hot social media startup could pump up the last valuation by another 20 percent. Facebook is currently kicking around the prospect of moving $1 billion in shares held by employees, according to Inside Investor Relations. This is likely because employees who took stock over cash in the early days are seeking to realize some of their gains. Usually, this isn't a good move, as the surge in share value that comes with an IPO is where the early employees get the biggest bump, but Facebook's value is already sky high. And, it looks like an IPO isn't as close as the employees had hoped. The original report, on AllThingsD, indicates that the company is "under pressure to allow its staff to offload shares following the revelation last month that it may not go public for more than a year." What is interesting in all this is that even when it's under pressure, Facebook has the muscle to "make its own rules" - i.e., define its own value. In mere months, the transaction that it's investigating would trigger a 20 percent spike, simply through price-setting willpower. For shares continuing to be held by the company's employees, it looks like some degree of relief could come next year. Facebook has indicated that it expects to have more than 500 shareholders at some point in 2011, Inside Investor Relations continues, which would result in the need to file financial information by April 2012. When that happens, an IPO may be around the corner, as the disclosure requirements might as well come with the valuation upside associated with participating in public capital markets. So, can we believe a $60 billion valuation for Facebook? Obviously, it's hard to say. I get the feeling right now that the company can set virtually any price it wants and get it, as there is a large group of investors that appears to want a piece of the Facebook action, even if it's getting shafted a bit on the price of admission. At a certain point, however, the tide will turn on this, which is likely to be an indicator of how the investing public would value the company. My bet (and that's all it is) is that Facebook will be able to make the $1 billion share sale at a $60 billion valuation happen. Based on the Goldman Sachs deal, it just feels like there's still a lot of pent up demand. But, this game of "non-public" big transactions can't go on forever, and Zuck & Co. will have to make the big step forward.

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Facebook to Engineer its Own $60 Billion Valuation

Tom Johansmeyer

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Tom Johansmeyer