Goldman Sachs Facebook Deal Making A 'Mockery' Of The SEC?

Is Goldman Sachs' Facebook deal worthy of SEC scrutiny? The New Yorker's John Cassidy yesterday reacted to the news of the deal paging SEC chief Mary Shapiro: "once again the boys and girls at Goldman Sachs appear to be making a mockery of you and your colleagues."

Yesterday, news broke that Goldman Sachs set up a "special purpose vehicle" to allow its wealthy clients to invest in Facebook, despite the fact that Facebook is not yet a publicly traded company. Dealbook outlines the arrangement, which values Facebook at $50 billion, like so:

While the S.E.C. requires companies with more than 499 investors to disclose their financial results to the public, Goldman's proposed special purpose vehicle may be able get around such a rule because it would be managed by Goldman and considered just one investor, even though it could conceivably be pooling investments from thousands of clients.

Bloomberg, for its part, spoke to James Angel, a finance professor at Georgetown University's business school in Washington, who said that if the special purpose vehicle could be ruled illegal if it designed to get around the SEC rules.

Dealbook notes, Goldman's involvement puts the company in a strong position to take Facebook public, in "what is likely to be a lucrative and prominent deal." For, Facebook CEO and founder Mark Zuckerberg, who is said to own roughly one quarter of the company, the move is not only a financial windfall, but a way to retain full control of the company.

Goldman Sachs clients are apparently jockeying to get into the arrangement. To even be considered, they reportedly have to have a net-worth of at least $10 million. Additionally, CNBC reports that would-be investors will have to pay steep fees up to 5 percent up front and more on profits earned. Goldman will reportedly invest $450 million, and is expected to raise up to $1.5 billion from investors.

Last week, the Times reported that the SEC was looking into the "red-hot" trading market developing in the shares of privately held social networking sites.

Comments

[breezyholler]

07:21 AM on 01/13/2011

All facebookers should be very aware that their personal info is forever compromised by this deal. This is the beginning of total corporate/government control of the Internet......FEAR THIS !

[DebtNavigation]

01:44 PM on 01/05/2011

No one should confuse the government with the people who run this country. Goldman Sachs are the latter.

[karen1p]

12:42 PM on 01/05/2011

I guess Goldman thinks they have a winning strategy. It continues to work even though it involves misrepresentation, deceit and failure to disclose. And they just keep running with the same strategy.

Yes, it makes a mockery of our regulators, but apparently our regulators cannot discern this.

[ttaz4dqm]

12:29 PM on 01/05/2011

The SEC mocks itself. Daily.

[blogisti]

10:37 AM on 01/05/2011

Money, brains and lobbyists trump the SEC. What else is new?

[williambanzai7]

02:23 AM on 01/05/2011

Check out SquidFace:

http://www.zerohedge.com/article/squidface

[meretricious]

06:26 PM on 01/04/2011

I am totally unfriending Goldman Sachs.

[logicanada]

06:23 PM on 01/04/2011

Ooohhhh Juliannnnnn. It's time for you networkers to shut down FaceBook.

[disprovit]

06:17 PM on 01/04/2011

$50 Billion for a company that does not manufactur­e anything, does not sell anything and does not provide a constructive service?

I can not think of any other company in last decade that is hyped out as much as FB and this time GS transaction is just an attempt to hype FB value before it goes on public. This so called "SEC scrutiny" is also just means to impose that this transaction is ***important***

[MysticLady]

07:10 PM on 01/04/2011

This is the Craziest Gambling Scheme I Have Ever Heard Of!

[slogward]

05:59 PM on 01/04/2011

In the UK we call the Goldman attitude 'brass neck'. As the Glazers showed by taking Manchester United private, you can pull all kinds of odd stunts once there are no Wall St regulators watching you. (You also can if they ARE watching you, but secret squirrel is easier).
The deal is sweeter than a Hershey bar: GS use the clients' money, nobody knows what the hell is going on, and the firm gets influential access to what will soon be the biggest comms outfit on the planet.
It's that last bit we all need to look out for.
http://hat4uk.wordpress.com/2011/01/04/beware-the-banking-lobby-is-at-it-again/

[Sundialsvc4]

06:55 AM on 01/05/2011

Oh, it might be "the biggest comms outfit on the planet," or it could be "dust in the wind." The Internet is like that. Lots of people while away their time by fiddling with things that don't cost them any money ... like posting things on The Huffington Post. ;-) ;-)

[kart]

05:41 PM on 01/04/2011

I think there are more people involved in this besides G.S.
http://www.youtube.com/watch?v=B37wW9CGWyY

[BadGimp]

05:29 PM on 01/12/2011

[crapped pants]

[kart]

05:38 PM on 01/04/2011

is this how you spell j.u.s.t.i.c.e. or J.u.s.t.u.s............

[Indigo1941]

05:32 PM on 01/04/2011

and a mockery of Facebook as well.

[Machiventa68]

04:42 PM on 01/04/2011

The FEC is a toothless giant. Facebook and Goldman Sachs want Facebook to function like a public company without having to follow any of the rules required of legitimate public entities. It's a total joke, but money talks and also carries a big stick.

[TheSpiderMind]

04:03 PM on 01/04/2011

I certainly hope Goldman makes a bundle investing the money it stole from us by virtue of it knowing participation in the sub prime fraud and attendant taxpayer funded bailouts.