Earlier this month, Goldman Sachs invested $450m in the social network company at a price that valued Facebook at $50bn. It was then reported that the bank was looking to raise $1.5bn for Facebook through an exclusive share offer, known as a private placement, for the bank’s top clients…
The bank planned to set up a “special purpose vehicle” to allow its clients to invest in Facebook. The plan was widely seen as a way to circumnavigate rules that restrict to below 500 the number of US shareholders a private company can have. It subsequently transpired that Facebook was planning to address the 500 rule itself by going public or publishing full accounts…
American law prohibits “general solicitation and advertising” in private offerings, banning banks from promoting an offer by taking out advertisements or communicating with media outlets. A Goldman representative said that the media coverage could have been interpreted by regulators as marketing and publicity in contravention of private placement rules…
The move is a major embarrassment to Goldman. Its clients were reportedly told they would have to pay a minimum of $2m to invest and would be prohibited from selling their shares until 2013. The restrictions proved no barrier to the appetite of the bank’s US clients. Goldman was flooded with requests for shares.
The move will also be a blow to Facebook. Goldman was reportedly aiming to raise $1.5bn for the company but had received orders for $7bn.
Foreign investors are not covered by the same rules and will still be able to participate in the Facebook offering…
The Securities and Exchange Commission is making noises like standing up on their hind legs is easier than they thought.
Overdue.
We have seen in the past that Goldman Sachs does not need to worry about our government, because Goldman Sachs are our government.
The bailout was not enough — GS will be pilfering plenty of the public’s money again, in multiple ways, and the SEC will simply make sure of it, like they always have.
This type of internal corruption is exactly what rotted the guts of the USSR. (And militarily occupying more middle eastern countries than they could handle, like Afghanistan.)
So Facebook could raise 7 billion in 2 million dollar increments, and SEC rules is causing the company to only sell shares to foreign investors? I thought the SEC was about protecting small investors. If you are investing 2 million dollars, the SEC doesn’t really need to be protecting you.
MikeN said in #2, “I thought the SEC was about protecting small investors.
No Mike, the SEC is all about protecting the SEC from fiscal bankruptcy.
Its the old principle of “one hand washing the other,” which is a must when they’re about to all get shoved deep down each other’s pockets.
If you’re investing 2 million dollars, then everybody wants a piece of that action.
Bottom line winners are foreign investors. No matter how much you value regulation in this case think of where the wealth is going… From USA home grown miracle company TO foreign investors. SEC should just shut up and adjust the rules in favor of USA investors.
I wonder how many of you would have said the same thing about Mortgage backed securities.
“Damn regulators! I want on the money train”
How come financial “innovation” seems to reply heavily on loopholes, frauds, and shady accounting?
I guess when you make no product and your industry relies on pushing imaginary paper, you’ve got to do something to keep the scam going.
Goldman embarrassed? Please! They know exactly what they were/are doing, and what the result was going to be. These people haven’t gotten to where they are by being ignorant. Perceived “embarrassment” is a small price to pay for what they have to gain.
tcc3, mortgage backed securities, I don’t have a problem with them. I have a problem that they were bought with money that did not belong to the people that bought them: bank depositors.
MikeN – indeed
Would be nice if there were some regulation or enforcement to prevent that sort of thing.
So Facebook, a US Corporation, hires Goldman-Sacs, a US corporation and trading company, to raise money. Yet somehow it is not regulated by US regulations.
WTF?
People. Here it is. Black and White. Our government has been bought and sold. We are officially Fascists here for the benefit of GS.
Do you need any more proof that the stockmarket siphons money from the poor, in the form of 401k contributions, and delivers it to the rich?
It is not in your favor.
Punish them! Make em play FARMVILLE continously!
“The move is a major embarrassment to Goldman”
That’s a joke, right?
Can’t wait to see what happens when the facebook bubble pops.
#13 – can I bet that when it does somehow GS aren’t the ones losing money?
Or would that bet be regulated by the SEC?
In house shares were valued for $9. They sold to Goldman for 30 and if I recall right all buyers are off shore.
This sounds like a scam from the word go.
Goldman Sachs doing something that they shouldn’t? Well that’s a surprise. *sarcasm*
The SEC actually maybe doing something about it? That actually IS a surprise.
Maybe, just maybe, G-S knows how flimsy the Facebook value is. They know Facebook is not worth 1/10 the advertised price. It is better to bow out now instead of facing all those expensive lawsuits later.