This week news hit that Goldman Sachs has invested US$ 450 million dollars in Facebook, in addition to the US$ 50 million dollar contribution from Russian firm Digital Sky Technologies. With around 500 million Facebook users, that’s a dollar for every user. So what does it mean?
The timing is curious considering Facebook CEO Mark Zuckerberg said he would like to wait until at least 2012 to consider an IPO. Facebook was given a 50 billion dollar valuation, and while some argue the valuation is wrong, Goldman Sachs will make money on the investment including IPO.
Word on the Street?
In tech news, including Forbes blogger Francine McKenna, criticism abounds that Zuckerberg “wants the public’s money -- and their trust -- with none of the disclosure and none of the regulatory scrutiny of a public company.”
Another critic from The New York Times criticized Zuckerberg arguing he’s guilty of showing a lack of interest in Wall Street while continuing to take its cash. According to the same contributor, when the amount of shareholders hits 500 the company must publicly unveil financial results. The number is 499 today. That is no accident. It’s reported this is a result of increased regulation on public companies and the rise in short-term trading, which leaves some executives feeling they have lost control of their companies.
The recent Silicon Valley cash injection was virtually non-existent just a few years ago, when start-ups like Pets.com and Webvan with scant revenue and no profits, hustled to go public, and investors eagerly lined up to buy their shares.
So far the SEC has not slowed down Facebook -- that doesn’t mean the SEC won’t.
According to the SF Gate, the Securities and Exchange Commission recently opened an investigation into the trading of shares of privately held companies like LinkedIn, Twitter, Zynga and Facebook on sites like SecondMarket and SharesPost.
Privacy and Security Take a Front Seat
In a system of checks and balances, some argue it’s increasingly dangerous for one company to have so much power without the increased level of transparency with its users. The government appears to be taking a back seat from playing God…yet.
Television series Saturday Night Live captured the zeitgeist of what is going on today in social media, technology and Wall St. in this video poking fun at Time Magazine’s “Person of the Year” Mark Zuckerberg and Julian Assange founder of WikiLeaks, who actually has a Facebook Page with more than one million fans.
Both WikiLeaks and Facebook bring up the issue of privacy, security and user trust, all of which changed this winter with WikiLeaks.
In no way am I saying these two organizations are cut from the same stone, but both organizations have faced public scrutiny recently regarding data security. Which one is more powerful or dangerous? That might still remain to be seen.
While businesses need secrecy to allow for strategic decision-making, innovation and growth, some argue Facebook -- probably the largest CRM system today -- has abused its power. And it’s only a matter of time when they can no longer find shortcuts around the system.