Facebook is looking for more money: Mark Zuckerberg’s social networking site wants up to $100 million in debt financing to help acquire computers, BusinessWeek’s Spencer Ante reports.
Facebook describes this as part of the normal course of business, according to Ante. It doesn’t help that Facebook isn’t bringing in any significant revenue.
The normal course of business explanation is a stretch. Emerging private tech companies don’t normally take on debt to buy equipment. (It’s not unheard-of, but it’s rare). Facebook did the same thing last year, for $100 million, which means it will have $200 million of debt.
This is not a big debt load relative to the $3-billion valuation the company’s stock is supposedly trading for in the private market. But a lot relative to the company’s $400 million or so of revenue. And the company almost certainly wouldn’t be doing it if it were able to sell equity at a price it liked.
BusinessWeek: Specifically, the company is looking for a handful of credit lines that would help it finance leases for the growing number of computers it needs to run its popular Web site. Such leases are used by well-known companies, including Google’s (GOOG) YouTube video service, and are a common way to finance equipment purchases in Silicon Valley. …
A Facebook spokesman says the effort is simply part of the normal course of business. Equipment leases offer lower up-front costs and certain other advantages over purchases. “Facebook always seeks to keep its costs of capital as low as possible, particularly in these uncertain economic times,” the company said in a statement issued to BusinessWeek. “Along with other Silicon Valley companies, we rely on a range of tools to do so, including equipment lease lines to acquire equipment.”