Facebook: The IPO That Wasn't Nor Will Be

Detractors of Facebook's $15 billion valuation make a strong case, as well. Analysts argue that Facebook's value has probably declined as badly as, if not worse than, that of Google or Yahoo! (YHOO Quote).

In October 2007, Microsoft had invested $240 million in Facebook for a 1.6% stake, bringing the overall value to $15 billion. In the deal, Microsoft not only bought preferred shares to make sure it would get paid first in the event the Facebook was acquired, but it also secured an advertising deal and elbowed Google out of the picture.

Since then, Google shares have plunged more than 40% to $323 a share, while Yahoo!'s stock has fallen more than 50% to $13. Even Microsoft has dropped 31% to $20. It's not hard to believe that Facebook's value has slid dramatically, as well.

As the economy has deteriorated, Facebook -- like many companies -- has been in need of more cash. In a December article, Web site TechCrunch reported that Zuckerberg confirmed that Facebook's $15 billion valuation round was still open and that the company's CFO Gideon Yu was open to new investors at that price.

Zuckerberg denied, however, that Facebook was searching for new investments at a lower valuation. "We're not actively going around trying to raise money from a lot of different people. It's more just a follow on to that [previous round]," he told TechCrunch.

No matter what Facebook is actually valued at, some analysts wonder if the company's ability to transform itself into a major tech player even exists, and that could be a major concern for Microsoft investors. Jeffrey Lindsay, analyst with Sanford Bernstein, argues that Facebook was the last best shot at an Internet initial public offering in the U.S.