Wall Street Journal
by AMIR EFRATI And PUI-WING TAM
March 17, 2011
Investor clamor around Web companies such as Facebook Inc. and Zynga Inc. is continuing to heat up.
Institutional investors have been competing to get into Facebook by purchasing shares of the company from Facebook employees, with the firm's blessing, according to people familiar with the matter. At least one large institutional investor has recently been turned away, said one of these people.
Two people familiar with the matter said the Facebook investment talks value the social-networking company at around $75 billion, while another person said the discussions value the company at more than $60 billion.
At the same time, social-game maker Zynga has closed its latest financing, said people familiar with the matter. The round raised around $500 million for the San Francisco-based company, said one of these people. The Wall Street Journal had earlier reported that Zynga was in fund-raising talks that valued it at roughly $10 billion.
The activity is the latest sign of growing interest in a set of fast-growing consumer Web companies, which also includes messaging service Twitter Inc. and daily-deals website Groupon Inc. Over the past few months, investor interest in these companies has soared, bringing in Wall Street money and spurring talk of a bubble.
Unlike dot-com companies a decade ago, however, the new crop of Web companies have attracted a large base of users and are generating revenue through online advertising and other means. Their valuations have climbed rapidly lately and also triggered share trading on private exchanges.
It's unclear how advanced the latest Facebook discussions are and which investors are involved. But the clamor indicates how some investors are willing to pay eye-popping valuations above Facebook's last publicly known investment in January. That month, Facebook was valued at $50 billion in a deal that raised $1.5 billion from investors such as Goldman Sachs Group Inc. and Russian investment firm Digital Sky Technologies, as well as some of Goldman's non-U.S. clients.
AllThingsD, a website owned by News Corp., which also publishes The Wall Street Journal, said last month that Facebook was exploring a tender offer for as much as $1 billion of its employee shares at a $60 billion valuation.
The tender offer would give Facebook employees liquidity and wouldn't raise additional cash for the company, according to the people familiar with the matter.
One person briefed on the matter said the shares involved would be common stock that had one transfer right, meaning that the holders can't resell the shares unless the company is public.
Prior to its January investment round at the $50 billion valuation, Facebook's last major financing was in mid-2009, when Digital Sky bought roughly $100 million in shares from Facebook employees and invested $200 million into the company at a roughly $10 billion valuation.
Facebook has said it expects at some point this year to pass 500 shareholders, a threshold that would require it to make public financial reports by no later than April 30, 2012.
Meanwhile, Zynga's new financing includes investors such as T. Rowe Price Group Inc., Morgan Stanley, Fidelity Investments and Kleiner Perkins Caufield & Byers, said a person familiar with the matter.
Representatives for T. Rowe Price and Morgan Stanley declined to comment. Fidelity didn't immediately respond to requests for comment. A spokeswoman for Kleiner Perkins didn't immediately have a comment.
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