Facebook’s $15B Moment: Will Zuckerberg Blow It?


Kara Swisher says that Facebook is still dickering around with idea of accepting money at a $15 billion valuation.  Among the questions that are apparently on the table:

  • Would Facebook just be giving away equity at a bargain basement price?
  • Should CEO Mark Zuckerberg insist on creating a super-majority voting stock?
  • Mightn’t Yahoo instead of Microsoft make the better investor?

With all due respect to Zuckerberg, if he spurns the opportunity to raise $500 million through the sale of a 3% stake in the company–to Microsoft, Yahoo, or anyone else–he will reveal only one thing: He’s reading too much of his own press.

Facebook has an enormous opportunity, and if the company doesn’t blow it, it could be worth every bit of $15 billion.  Part of not blowing it, however, means playing the odds, and when investors are literally begging you to take their cash (as they appear to be), the odds almost always favour taking some of it.  Why?

Because the economy might weaken tomorrow, taking Internet advertising spending down with it.  Because a competitor might develop an interesting solution that Zuckerberg might want to buy.  Because the stock market might crash, converting Facebook’s $15 billion valuation into $5 billion (or less).   Because Zuckerberg might do something stupid (sorry–this has to be considered a possibility).  Because in all of these cases and more, it would be nice to have $500 million in the bank.

And the cost of that $500 million?  Basically zero.  Facebook would be trading 3% of its equity for many years of additional aggressive growth, hiring, risks, etc., and putting all its competitors even more on the defensive. 

It’s a fine line between “bold” and “reckless,” and we’re soon going to learn which adjective better fits Mr. Zuckerberg.