Photo: Sit with Me on flickr
A source who deals with a lot of tech M&As made a good point on the phone yesterday.Even after spending $1 billion in cash and stock to buy Instagram earlier this week, Facebook STILL has at least $4 billion in cash to spend right now.
That’s because, about a month ago, Facebook’s IPO bankers added another $3 billion to the company’s credit line, raising it to $5 billion.
In a couple weeks, Facebook will have another couple billion to spend, thanks to its $5 billion IPO.
Now, it’s obviously very unlikely that Facebook will go out and spend any of that $4 billion in the next few weeks or months.
But – and this was our source’s good point – the cash does mean that Google or Microsoft or Amazon can’t step in and buy Tumblr, Pinterest, or some other big social media startup without worry about Facebook bidding up the price.
There is no Facebook-is-out-of-cash-discount for its rivals.