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There was never really any doubt, but Facebook has now officially raised $1.5 billion from Goldman Sachs and Digital Sky Technologies in a deal that values the company at $50 billion. In a statement the company put out this afternoon, the social network confirms that a controversial “special purpose vehicle” created by Goldman Sachs to let its high-end clients invest in the social network was “oversubscribed’ and brought in $1 billion, while Digital Sky Technologies and Goldman Sachs together put in another $500 million last month.
In a short Q&A attached to the announcement, Facebook says it has “no immediate plans” for the cash, saying it decided to accept it because it was an “attractive opportunity to bolster its cash reserves and increase its financial flexibility with limited dilution to existing shareholders.”
It also acknowledges widespread accusations that by creating the “special purpose vehicle” Goldman Sachs was trying to do an end-run around SEC regulations that mandate private companies with more than 500 investors have to disclose their finances. Facebook says that even before taking the investment it expected to have more than 500 shareholders sometime this year and therefore share information about its financial state by April 2012.
Here’s the full announcement:
Facebook today announced it has raised U.S.$1.5 billion at a valuation of approximately $50 billion.
The transaction consisted of two parts. Today, Goldman Sachs completed an oversubscribed offering to its non-U.S. clients in a fund that invested $1 billion in Facebook Class A common stock. In December, Digital Sky Technologies (DST), The Goldman Sachs Group, Inc., and funds managed by Goldman Sachs invested $500 million in Facebook Class A common stock at the same valuation.
“Our business continues to perform well, and we are pleased to be able to bolster our cash position with this new financing,” said David Ebersman, Facebook’s chief financial officer. “With this investment completed, we now have greater financial flexibility to explore whatever opportunities lie ahead.”
The investment generated a significant number of questions from interested parties and Facebook has addressed the most common ones below.
Why did Facebook raise this money?
DST and Goldman Sachs approached Facebook to express their interest in making an investment, and Facebook decided it was an attractive opportunity to bolster its cash reserves and increase its financial flexibility with limited dilution to existing shareholders.
Why did Facebook choose to raise $1 billion in the overseas offering?
Under the transaction’s terms, Facebook had the option to accept between $375 million and $1.5 billion from the Goldman Sachs overseas offering, at the discretion of Facebook. While the offering was oversubscribed, Facebook made a business decision to limit the offering to $1 billion.
What are Facebook’s plans for the proceeds of this transaction?
There are no immediate plans for these funds. Facebook will continue investing to build and expand its operations.
Does this investment mean that Facebook will have more than 500 shareholders?
Even before the investment from Goldman Sachs, Facebook had expected to pass 500 shareholders at some point in 2011, and therefore expects to start filing public financial reports no later than April 30, 2012.