Elevation Partners' Facebook Stake Now Valued At $1 Billion+

Elevation Partners, which was founded by U2 frontman Bono and Roger McNamee, has had its share of ups and downs since its inception in 2004.

The private equity firm was almost universally derided mere months ago after taking some very large stakes in Palm and Forbes. The Palm deal, which seemed destined for failure, actually ended up turning a profit (a reported $25 million) for Elevation after Hewlett-Packard snapped up the company, but the damage had seemingly been done. A highly-regarded principal (Patty Halfen Wexler) left the company, and it seemed as though the grand ambitions of the Silicon Valley private-equity firm were on hold.

Somewhere along the line, Elevation Partners decided that it would be smart to invest some of its $1.9 billion fund in Facebook.

In late 2009, Elevation Partners reportedly made its first investment in Facebook, spending $90 million to acquire roughly 1% of the company. These shares were bought on the secondary market from Facebook employees, etc. This investment gave Facebook a valuation of $9 billion. At the time that this news was announced, many people snickered, figuring that Elevation Partners had blundered their way into another colossal mistake of an investment.

A few months later, Elevation Partners struck again, spending $120 million for an addition 5 million shares of Facebook (these shares were again bought through the secondary market). This investment was made despite the fact that Facebook's valuation had soared 2 1/2 times over the course of just a few short months.

So, blended together, Elevation Partners now owned 7.5 million shares of Facebook (total cost of $210 million) at a $14 billion valuation.

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Fast forward to 2011.

Goldman Sachs sent shock waves throughout Wall Street and the investment world when it was announced that they had invested $450 million into Facebook, with an additional $50 million coming from Digital Sky Technologies.

This $500 million investment valued Facebook at $50 billion and also gives Goldman Sachs the inside track when it comes time for Facebook to file for an IPO. In addition, Goldman Sachs also announced that they would be creating a "special purpose vehicle" that would allow for its high net worth clients to invest in Facebook.

So, just like that, Facebook was now worth $50 billion.

But the good news didn't stop there for Facebook investors.

According to this Techcrunch.com article, Facebook is now trading at a valuation of over $70 billion on the secondary market. The hype from the Goldman Sachs investment has lit another fire under Facebook's shares as people come to the realization that Facebook will likely become publicly-traded some time during 2012.

This means that Elevation Partners' investment in Facebook is now worth approximately $1.05 billion, despite the fact that they just started accumulating their position roughly 13 months ago. Not bad at all considering the fact that the fund initially had around $1.8-$1.9 billion to invest. Elevation Partners also has active investments in companies such as Forbes, Move and Yelp, as well as the cash from closed investments in companies such as Palm.

Elevation Partners, which was seemingly on the ropes (at least in the eyes of the public) just a short while ago, has now sprung back to life, mainly thanks to its ultra-successful Facebook investment.

This is good news to the investors in Elevation Partners, including U2 frontman Bono.

Source: Elevation Partners


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