Pinterest and Bono cash in on 'Facebook effect'

Social networking site Pinterest has raised $100m, valuing the two-year old business at £1.5bn.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
This latest chunk of cash, stumped up by Japanese e-commerce group Rakuten and some of Pinterest’s existing US investors, has increased the firm's valuation five-fold – it was worth just $200m back in October.

The network, which lets users ‘pin’ interesting items from around the web on to their public notice board, has amassed 20 million users since launch, and has prompted its very own ecommerce revolution, creating an alternative marketplace for cool and kooky items.

Founder Ben Silbermann, ex Google employee and Silicon Valley entrepreneur, sealed the deal just hours before Facebook confirmed the price for its estimated $104bn float later today. However, the timing of the deal and  Pinterest’s hefty new $1.5bn valuation is fuelling talk of another dotcom bubble.

Indeed, over in Facebook land, some interesting developments are taking place. Investors across the board are upping the number of shares they are offering in the IPO. Peter Thiel, who invested $0.5m in Facebook way back in 2004, now stands to make as much as $847m in the flotation after putting a larger chunk of his stake up for sale. He’s now offloading 50% of his share, up from 20%. And, according to the Wall Street Journal, DST Global, the investment fund owned by Russian investor Yuri Milner, is now selling 40% of its stake, up from 23%. Goldman Sachs too, which co-invested with DST, and Tiger Global Management will both sell up to 50% of their stakes, up from 23% and 7% respectively. Bono, however, who bought £56m-worth of shares three years ago seems to be holding on to his stake. Now worth more than £940m.

What this selling spree means, ultimately, is that many shareholders do not believe that Facebook’s valuation will increase much beyond the initial float. Add this to recent reports that advertisers are leaving Facebook in droves - General Motors' marketing chief Joel Ewanick announced drastic cuts to the firm’s $40m spend on the social network yesterday - and Facebook's mammoth valuation looks even more out of place.

But is it evidence of a second dotcom bubble? You decide.

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