Sophisticated investors won't be surprised to learn that Facebook Inc. values itself at $3.7 billion, far below the $15 billion outsiders estimated the social network's worth to be after Microsoft Corp. picked up 1.6% of the company for $240 million in 2007. More intriguing is how The Associated Press discovered the internal valuation.
The $3.7 billion value dates back to a June court hearing in which Facebook lawyers used the figure to argue that the company's settlement with founder Mark Zuckerberg's former Harvard classmates at ConnectU, who contend he stole the idea for Facebook from them, was fair. The judge agreed. But the judge also agreed to have much of the transcript from the hearing redacted.
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However, by simply
copying and pasting the redacted parts from one electronic document to another, the AP "was able to read the blacked-out portions."
In another breach of so-called security, Quinn Emanuel Urquhart Oliver & Hedges, a law firm that had represented ConnectU in the case (but is no longer obtained by the social net due at least in part to a dispute over fees), boasted that the settlement was worth $65 million in a marketing brochure that was
obtained earlier this week by The Recorder.
According to the AP, Facebook agreed to pay ConnectU $20 million in cash and 1,253,326 shares of common stock. The stock was worth $45 million, based on the Microsoft valuation, but only $11 million under Facebook's own appraisal. "That means ConnectU received anywhere from $31 million and $65 million for settling the suit, depending on which stock valuation is used."
Venture capitalists have long argued that Facebook's valuation is closer to $4 billion, pointing out that Microsoft bought Series D preferred stock, and now it seems Facebook agrees. -
Mary Kathleen Flynn
