Is Facebook really worth $10 billion?

Facebook says it's worth $10 billion. That's more than, say, Sunoco (gasoline) and Cigna (medical payments) combined. Not bad for a company that says it has millions of free Web visitors but, so far as we know, no profits.

"Digital Sky Technologies (DST), one of the leading internet investment groups globally with significant stakes in Eastern European and Russian internet businesses, has made a $200 million investment in Facebook in exchange for preferred stock, representing a 1.96 percent equity stake at a $10 billion valuation," Facebook said today in this statement.

Too fast? If 2% = $200 million, 100% = $10 billion. Big number for a firm that started as Mark Zuckerberg's online-classmates project at Harvard.

"In addition, DST has indicated that it is planning to offer to purchase at least $100 million of Facebook common stock from existing common stockholders that would facilitate liquidity for current and former employees' vested shares in the company." So, this is a way for founders and key employees of the Palo Alto, Ca. firm to cash out.

Who's DST? "Based in London and Moscow, DST is a well-respected investor in a number of successful internet companies, holding significant interests in Russia and Eastern Europe, such as Mail.ru, Forticom and vKontakte. DST's main assets account for over 70 percent of all page views in the Russian-speaking internet and its social networks are the market leaders in more than 13 countries, addressing a combined population of more than 350 million.

"DST is run by its three partners who have complementary backgrounds in operations, investments and finance: Yuri Milner, previously CEO of Mail.ru, the #1 Russian language website; Gregory Finger, previously head of the Moscow office of NCH, a multi-billion dollar hedge fund; and Alexander Tamas, previously co-head of internet and software coverage in (Europe, Middle East, Africa) for the Investment Banking Division of Goldman Sachs."

ADD: Got this note from Boston University Professor N. Venkat Venkatraman, chairman of the Information Systems Department at BU's management school.

"Facebook is at an inflection point in 2009.  It cannot fund the investment required to support its membership levels (200 million and climbing) with internal cash flow; it cannot slow down to allow Google, Twitter, Apple and others to catch up; it cannot go to the IPO market at the present time.

"While Zuckerberg says that he does not need the money for operations, he needs the money for investments.  This investment does not challenge Microsoft in any way, focuses on activities outside USA, and is relatively small at this stage to be anything more than a good cash cushion for Facebook to fire on multiple fronts."