Russian investment firm Digital Sky Technologies has begun buying more shares in Facebook, seeking to expand its stake in the world's No. 1 social networking company, two sources told Reuters.

DST has begun purchasing shares directly from Facebook's shareholders, two people familiar with the deal said on Thursday on condition of anonymity.

Since its creation in a Harvard dorm room five years ago, Facebook has emerged as one of the Internet's most popular destinations and is increasingly challenging established powerhouses like Yahoo Inc and Google Inc.

The social networking phenomenon, which counts Microsoft Corp as an investor and has signed up 300 million users, is considered one of the tech world's most promising candidates for an initial public offering, though CEO Mark Zuckerberg said in May an IPO was a few years out.

Their appetite with me is: 'whatever you have, we'll take it,' said one of the sources, a Facebook shareholder who agreed to sell his stock to Digital Sky.

According to the shareholder, DST is offering $14.77 a share, the same price paid in July when it bought $100 million of Facebook shares from the social networking site's employees and ex-employees, at a $6.5 billion valuation.

Facebook employees received priority to sell shares to DST in July, while ex-employees were limited to selling roughly 29 percent of their intended amount, due to high demand for the tender offer.

WELL ON THEIR WAY

The source said he believed DST's agreement with Facebook prevents it from soliciting further shares from Facebook employees and that the firm must now acquire stock from shareholders not employed by Facebook.

DST also invested $200 million in Facebook preferred shares in May. The two transactions gave DST a 3.5 percent stake in the company.

A second source familiar with the matter said DST could buy up to $100 million of additional Facebook shares, though that amount had not been finalized.

They're well along the way, the second source said.

Representatives for Facebook and DST were not available for comment.

Last month, Facebook said it has reached 300 million users -- equal to the population of the United States. That is triple the amount it had a year ago.

The company has also said it recently turned free cash flow positive, meaning that it makes enough money to cover operating costs and capital spending.

Facebook director Mark Andreesen told Reuters this year that the company will surpass $500 million in revenue this year.

DST's move comes a week after Twitter won $100 million in financing from mutual funds giant T. Rowe Price and other investors, valuing the three-year old microblogging sensation at about $1 billion.

(Editing by Edwin Chan and Gary Hill)

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