Facebook has completed a $US1.5 billion capital raising that values the company at a staggering $50 billion, but the social networking leader has also revealed it’s not sure what it’s going to do with the cash.
The company, which has typically been coy about revealing the financial details of its growing operations, said in a statement released over the weekend that it had raised $US1 billion in cash from non-US clients of investment banking giant Goldman Sachs.
This comes weeks after Goldman Sachs and Russia’s Digital Sky Technologies pumped $500 million into the company in late December.
While Facebook proudly trumpeted the fact the company is now worth $50 billion – even more than established tech giants such as eBay and Amazon – a statement released after US market close does raise some questions about whether Facebook really needs the cash.
It appears the company wasn’t even looking for fresh capital. The statement says Goldman Sachs and Digital Sky Technologies approached Facebook looking to invest and the company decided it would be “an attractive opportunity to bolster its cash reserves and increase its financial flexibility with limited dilution to existing shareholders”.
The company said it made a “business decision” to limit the capital raising to $1 billion and revealed that it’s not sure what it’s going to do with the cash.
“There are no immediate plans for these funds. Facebook will continue investing to build and expand its operations.”
However, the company’s chief financial officer David Ebersman did say the company was now well placed to take advantage of new opportunities.
“Our business continues to perform well, and we are pleased to be able to bolster our cash position with this new financing,” he said.
“With this investment completed, we now have greater financial flexibility to explore whatever opportunities lie ahead.”
Of course, investors will be hoping Facebook puts its new war chest to work pretty quickly.
The company may have a giant valuation, but in the lead-up to the capital raising Facebook revealed that it had revenue of $US1.2 billion in the first nine months of 2010, or about $US1.6 billion on an annualised basis.
Revenue will clearly need to increase exponentially if Facebook’s $50 billion price tag is to be justified.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
