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Privately held social network Facebook just saw its prices go higher. Digital Sky Technologies has announced it will pay $14.77 a share for an additional stake in the social network, bumping its total position in the company to up to 3.5%. If this deal is completed, it would imply a total value of $6.5 billion – down about one-third from Digital Sky's last investment in Facebook.
Even the $6.5 billion a share value is optimistic. Investors have pushed the value to below $5 billion in private secondary market transactions over the past few weeks. Nonetheless, the relatively new company is still valued well above major technology and media heavyweights, including CBS (NYSE: CBS) with a $4.06 billion market cap and SalesForce.com (NYSE: CRM) at a $4.72 billion market cap.
Though it's only hoping to break the $500 million market for revenues this year, it's eyeing a 70% growth rate. So, much of the value – as with any company at this stage – is based on potential. But, $6.5 billion seems to include a lot of hope.
The Digital Sky investment comes in at 13X expected revenue – far ahead of the 2.2X norm for the online ad business. It's even more than double Google's (NYSE: GOOG) revenue multiple (approximately 6X). If all goes as planned, Digital Sky will amp up its stake by $100 million.
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