Goldman Positions Itself for a Facebook IPO?
By: Wall Street giant Goldman Sachs invested $500 million in the social networking site Facebook, in a deal that values the company at $50 billion.
This has sparked renewed hope that a Facebook IPO (initial public offering) might happen by year-end 2011.
"At a $50 billion valuation, I think we'd all agree it's pretty extraordinary," Tom Fox, head of global capital markets in the Americas at UBS, told CNBC's "The Strategy Session" on Monday.
With firms like Goldman investing in companies before they go public, Fox said there's an informal agreement that places them in the best position to be a lead underwriter, should the company decide to go public.
"They've supported the company from an equities standpoint and they're going to make a case for lead left in terms of taking that company public," Fox went on to say.
"If they [Facebook] can raise capital on a private basis at a valuation equal too or maybe even higher then what they could on a public basis, that's attractive," Fox added.
"It becomes a competitive advantage to have that currency, trading at a valuation that's sufficiently at a premium to the competitor, such that they can have an advantage in terms of acquiring assets out in the market," he said.
But Fox points out that Goldman is not the first company to do this.
"If you go back to the Chinese banks back in 2000, 2005 they were all raising private capital—even though they probably could've gone public—before they went public," said Fox.
Watch CNBC's "The Strategy Session" weekdays at Noon ET.