Goldman+Sachs+Fb+Acquisition

 Overview
In January [|Goldman Sachs Group Inc]. invested [|$450 million] into Facebook, along with another $50 million from a Russian venture capitol firm, of which Goldman owns a significant share. This is an incredibly interesting decision for many reasons. Goldman calculated the market value of Facebook at $50 billion dollars. However, it is estimated that Facebook has no more than $50 million in tangible assets (intellectual property, servers, talented employees, patented code, etc). So why does Goldman feel that the company should be valued at $49.5 billoin more than their tangible assets?

Facebook has yet to find a way to effectively monetize its business. Through apps and business Facebook generated an [|estimated revenue] of $2 billion last year, however this still leaves a huge shortfall compared to Goldmans estimated value. It begs the question, how highly does our culture value social media? What is to say that Facebook won’t see a huge downturn in usage the way that Myspace has the past few years due to the next big social networking site. Look at the two graphs of Myspace and Facebook usage from [|2008] and [|2010]. The Facebook business plan is unprecedented, and therefore, not proven to be sustainable.

Through there are some clear differences between a company such as Myspace and Facebook, the sites are similar enough that analysts can compare and contrast the two. The question is whether Facebook can avoid the mistakes which Myspace did. According to this NY Times [|article] Myspace undoing was focusing on money where as FB has focused on growing it's base and this has led to investments such as the one from Golman Sachs because it is valued so highly, even if most of their assets aren't tangible. The second point the article makes is the cyclical nature of internet businesses. It will be interesting to see if Fb can find a way to effectively monetize itself or if it will decline and a new alternative will appear. Goldman clearly believes that Facebook can become a sustainable and hugely profitable corporation, and is at a point close to where Google was five years ago before its [|IPO]. If they are correct than their investments will be proven brilliant, however if Facebook suffers the same cycle that Myspace went through their money will not have been well spent.

This also begs an interesting question about Facebook’s financial future. With Goldmans investment, Facebook has opened itself up to to an SEC investigation and a possibly forced IPO. [|SEC] regulation states that a company with more than 499 investors must offer an IPO, however Facebook would like to consider Goldman Sachs Inc. as only one investor despite the fact that thousands of people may be giving Goldman money to put towards Facebook. This is a phenomenon know as the [|shadow market], where investors are able to invest money into companies which have not yet gone public, however it sets them up well to control a large portion of stock when an IPO does eventually happen.

In a recent development, Facebook is now allowing employees to sell over one billion dollars in stock at a price which values the company at 60 billion dollars. This [|article] also states that Facebook is planning to start reporting financial results by April 2012 because they are estimating to have more than 500 investors by the end of the year. They have not however announced definitive plans for an IPO.

**Opinion**


**Future Trends?**
 Is the Facebook bubble going to pop? If it does, what ramifications will this have on our culture and increasingly in the business world?