Friday fun – $15bn for Facebook, don’t believe the hype

By October 26, 2007 No Comments

This is from the comments on a Fake Steve Jobs post about two hedge funds apparently investing $500m in Facebook at the same $15bn valuation Microsoft just paid.  (Thanks to Alan for the pointer.)

Picture this: Zuckerberg’s got a big fish on the line for real money at a $15 Bill valuation. But is having trouble landing it. So he calls up his buddy at MS (formerly of Groove Networks) and his other contacts from working with MS so far on selling ads. They work out a deal where they get to say publicly that MS has dropped $240 Mill for 1.6%. What isn’t so public is that a lot of it works out to funny-money; MS product, MS services contracts, consulting fees, etc. And a good deal of the real cash MS looks to get back with side contracts for future purchases from MS. So the real money spent is much smaller but Facebook still gets real investment because MS is just a ringer in the crowd to suck in the real marks. And MS gets their hedge on Facebook at a discount by trading on their name. Plus MS gets sales to Facebook on the books to add a little juice to their earnings number.

I don’t know about the conspiracy theory part, but I would be surprised if there isn’t some substance to the idea that Microsoft gets some kickbacks which they deducted from the headline $240m purchase price when doing their valuation calculations.