Is there are particular method for banks or individuals when their capital is invested in the company before going public?

To make it more clear, how was the Facebook Inc. and Goldman Sachs deal valued at $50 Billion.

Does it mean Goldman Sachs will have returns double of its investment or more with time or immediately after it goes public? Is this applicable for individuals too? If some high net worth individual would have invested $450 Million in Facebook Inc. would it have been valued $50 Billion?

I'm hoping for a general answer for all companies' stock valuation.

  • 1
    It is not actually selling Facebook stock to Goldman Sachs. The deal provides GS with a block of stocks estimated to be valued at $50B to sell to their customers immediately at release. The actual amount sold may be more or less and GS gets their cut from their clients.
    – user4127
    Oct 10, 2011 at 18:05

1 Answer 1


This is a question of how does someone value a business. Typically, it is some function of how much the company owns, how much the company owes, how risky is the company's business, and how much the company makes in profit.

For example if a company (or investment) make $100/year, every year no matter what, how much would you pay for that? If you pay $1,000 you'll make 10% each year on your investment. Is that a good enough return? If you think the risk of the company requires a 20% payoff, you shouldn't pay more than $500 for the company.

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