You know what's cool? $ 100 billion is cool

" It is worth $ 50 billion "
Such a phrase should be pronounced by Mark Zuckerberg at meetings with potential investors. Surely this year there will be a lot of them.

Facebook’s valuation of $ 50 billion says one thing - Zuckerberg himself is 5 times more than the entire AOL, and his creation is more than Boeing. And now Goldman Sachs, Platinum collars of Wall Street, are preparing “special purpose dough transport” in order to snatch an even bigger piece.
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I think that the history of the social network is just beginning, because changes are coming that will turn Facebook into a really huge company that has weight in the global economy. But what is happening right now is a turning point in her financial life, since people who were not in Silicon Valley took up the case. They are still sitting on Wall Street.

So Mark found himself a banker.

Venture Capital vs. Wall street

Do you recognize the uncle at the top? This is Lloyd Blankfein , a man who, in general, buoy, how much is the company. It is much more important that they want to buy it, and this can be earned. And the clients themselves come to him, unless something really cool happens.

Facebook Social network, where according to the latest data there are already more than 600 million users, and it can be partially purchased. However, on Wall Street they know that “buying another” is much more profitable, since you get rid of the risk by making a profit. But how to do this if you do not have your own exchange platform, while others possessed securities bought it at a floating price (the price of a share differs in each transaction)? The correct answer: sell to customers. Rich customers. They, by the way, are also on Wall Street.

But, wait ... if you start selling the company's shares to customers for whom these shares will be assigned, then the rule of " 500 investors / $ 10 million assets " will quickly take effect. Upon reaching this critical point, private companies in the United States must complete quarterly / annual reports for the SEC, no matter what. And it is precisely this moment that Facebook is trying to delay, because when the numbers become facts, it will become hard to raise the price of shares - on the one hand, and on the other, you will have to generate profits, real profits, at a constantly increasing level, otherwise the securities will no longer be liquid and will lose investor interest , as well as many other interesting factors. In fact, this is air trade in a vacuum, which attracts investors even less if a company does not cope with the generation of attractive money, as is often the case with startups. In America they say: "Going public is hard, but being public is much harder"

It is for this reason that the Valley has long been clear of bloodsuckers, eager for profit. In addition, according to rumors, an opinion is hovering in Palo Alto that the IPO is “broken and startups remain in losers”. However, until recently, it was actually the only way to get $ 1 billion + at an interesting estimate of the cost, in exchange for liquidity and official financial data (quarterly and annual reports). But a small company can not afford a public offer of shares - it is simply meaningless. A big one way or another will be in free trade in the primary market . By the way, on the first day of trading, Google’s market capitalization (the most successful IPO in history) was almost twice as low as Facebook’s current valuation, whose P / E ratio was x100 in 2010, with an estimate of 50 billion.

And here the venture capital comes to the rescue: angels, incubators, funds that are ready to invest in risky projects in fact at the idea stage. Virtually all world names with a history, such as Google, Amazon, Yahoo !, Microsoft and Apple, started this way. Facebook started the same way, with Peter Thiel's $ 500,000 ( Peter Thiel , company valuation in 2004: 5 million, with a current estimate of his profit of x10000). However, it is impossible to take in small portions indefinitely (500 investors), and sooner or later you will still have to publish financial reports. I would like to do it later ... but after all, the demand that is pulling out of hand is already on the market today.

Scheme

As you know, if two people want to conclude a mutually beneficial deal, no one and nothing can prevent them from doing so. The only difference is that Goldman Sachs was not for nothing called by Warren Buffet “a special purpose institution” - they can build a bridge there if the seller is on the other side.

Having invested $ 500 million in Facebook in the last transaction, for a couple of DST, it dawned on them how to make money on it. It is necessary to create a fund that will redeem a part of the company's shares for a closed circle of owners, putting them a commission for the transaction at the level of 4-5%

Thus, to satisfy the demand of private and wealthy investors - Goldman Sachs customers, and a company that is not ready to become public, but requires money for further development, while remaining independent.

This is a completely new opportunity created by Goldman special for the giant social networks. Alternative IPO in which the startup remains in the winners.

For what? First is the profit. The fund is almost assembled from the richest clients of Goldman Sachs, whose wallet is at least $ 30 million; and the minimum investment is $ 2 million. Although everyone understands that the bank will give preference to the most loyal customers, of which it is enough, even though none of them have the slightest idea about how “this thing will generate profit at the level of expectations. After the formation of the fund, small customers will be discarded (for example, the investment at the level of $ 2 million is dismissed now), and the investment is blocked for 2 years.

Secondly, in this way, Goldman Sachs literally bought himself the exclusive right to conduct a public offering of Facebook shares. And this is much more interesting, as there is an opportunity to arrange pre sales auction, again removing the cream from the investments of its own clients, thus earning more on the same. On Wall Street, no one has heard that one cannot enter the same river twice.

Exodus

In an ideal situation, Facebook could easily be valued at $ 100 billion by the beginning of 2012, with annual revenue of, say, $ 3 billion. Without cash flow data, without data about when the cash materializes, without exchange rate data "Cache". And this is already a trade in spherical air in a vacuum, which the SEC will definitely not like.

This means, and most experts in the field of the stock market agree on this, that Facebook will have to make an initial offering no later than 2013. I'm sure that is exactly what Goldman Sachs wanted.

In addition, in the world of securities there is always a simple rule: if someone wins, the other loses. Who loses in a situation when a company that is already worth $ 100,000,000,000 goes on sale? Roughly speaking: all those who did not have time to closed. Profit at 2x, 3x, even 10x - not comparable with the 100x, familiar to successful IPOs. And despite the fact that Facebook, and even more so Goldman, will try to make this exit as spectacular as possible, the trading floors, the securities commission, and large investors buying rations in the placement process have already been circled around their fingers. They can only watch.

One way or another, Facebook will try to delay the moment it enters the primary stock market as long as possible in order to find and polish its own business model, which still does not look reconciled.

In preparing the material were used publications RWW , TechCrunch , BusinessInsider , NYT , Wired