SAN FRANCISCO (Reuters) - Private equity firm Elevation Partners purchased $120 million in Facebook stock from private shareholders, valuing the company at $23 billion, according to a person familiar with the matter.

The stock purchases represented Elevation’s second round of investments in shares of Facebook through the secondary markets, giving the firm a 1.5 percent stake in the world’s largest Internet social network.

With nearly 500 million users, Facebook ranks as one of the world’s most popular Web sites, alongside established Internet giants like Google Inc and Yahoo Inc, and is closely watched by investors eager for a blockbuster initial public offering.

Facebook generated between $700 million and $800 million in revenue in 2009, two people familiar with the matter told Reuters earlier this month.

A vibrant market for shares of privately held Facebook has developed in the past year.

In April, Facebook barred its employees from selling their shares in the company to outside investors, except during specified periods. Facebook is not currently in a period during which employees would be permitted to sell shares, another source familiar with the situation told Reuters.

Elevation Partners and Facebook declined to comment. News of the funding was first reported by the technology blog TechCrunch.

Facebook’s backers include Digital Sky Technologies, Microsoft Corp Corp, Hong Kong tycoon Li Ka-shing and venture capital firms Accel Partners, Greylock Partners and Meritech Capital Partners.

Elevation Partners, whose partners includes U2 frontman Bono, committed to invest up to $100 million in online review site Yelp in January. The firm also invested $460 million in smartphone maker Palm over a period of several years. In April, Hewlett-Packard announced plans to acquire the struggling Palm for $1.2 billion.

Elevation acquired its latest batch of Facebook stock in a series of transactions over the past couple of months, the source said.

The firm had already purchased $90 million worth of Facebook shares based on a $9 billion company valuation in November. Elevation has invested in Facebook at a $14 billion blended valuation, based on the two investments, the source said.