Facebook valuation in eye of the beholder

February 12, 2009

The $15 billion valuation that Microsoft appeared to bestow on Facebook in 2007 provoked some scepticism – including within Facebook itself.

It turns out, the privately-held social networking firm has a much more conservative sense of self-worth, and puts its value at a one-fourth of the Microsoft figure.

According to redacted court documents obtained, and somehow decoded by the AP, Facebook valued itself at $3.7 billion in June, when it was in court over a dispute with a rival social networking site.

Sure, Microsoft invested $240 million for a 1.6 percent stake in Facebook in October 2007. But that was for Series D preferred stock. So the $35.90 price per Facebook share value implied by the deal does not apply to the rest of Facebook’s equity.

In fact, Facebook lawyers told the court, the company actually values its shares at $8.88 share, the AP says. What’s happened to the share price during the economic slowdown since that time is anybody’s guess.

The financial details come as a result of a squabble between Facebook and the three founders of ConnectU, who accused Facebook CEO Mark Zuckerberg of stealing ideas from their own social network site while they were all undergraduates at Harvard.

Facebook settled the case in June for an undisclosed sum (believed to be anywhere from $31 million to $65 million), and the ConnectU gang are now in arbitration with the lawyers that represented them in the case.

Meanwhile, Facebook appears to be eyeing the vast realm of cell phone handsets as its next big growth opportunity.

In September, Reuters reported that Nokia was talking to Facebook about ways to make it easier for people to connect to the site from their cell phones.

A Wall Street Journal article Thursday said Facebook is in talks with Nokia about forming a partnership that would allow Nokia to integrate Facebook features on its handsets. Among the potential areas of cooperation: a feature that integrates an individual’s Facebook Friends with the contacts list on their phone.

(Photo: Reuters)

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