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Goldman's Facebook Deal A 'Serious Embarrassment'

The Huffington Post   First Posted: 01/18/2011 12:01 pm EST Updated: 02/01/2013 4:22 pm EST

Two weeks ago, Goldman Sachs seemed perfectly positioned to take Facebook public. Now, that lucrative opportunity may be slipping away.

On Monday, the Wall Street Journal reported that Goldman Sachs had withdrawn the offer to its wealthiest U.S. clients to buy shares in Facebook. (The offer still stands for clients outside the U.S.)

This latest development in a deal that was initially termed "a mockery" of the SEC by the New Yorker's John Cassidy, has become an out and out embarrassment for Goldman Sachs.

The WSJ calls the news a "black eye for the Wall Street firm." Dealbook calls it a "serious embarrassment." Business Insider terms the entire mess "the Facebook fiasco." All three note how this news will in all likelihood hurt Goldman's chances to take Facebook public, a move that will could happen next year.

The WSJ neatly lays out the frustrations brewing among Goldman's clients and Facebook, respectively:

"The change could damage Goldman's ties to some of its most lucrative clients, left empty-handed just as they were deciding whether to invest in Facebook, clients say.

Facebook executives were frustrated by the headache of restructuring the deal at the last minute, according to people familiar with the situation. But the private offering of as much as $1.5 billion in Facebook shares remains on track."

The deal was originally structured as a "special-purpose investment vehicle," exclusively offered to Goldman's wealthiest clients, so that they could invest in Facebook despite the fact that Facebook is not yet a publicly traded company. According to Goldman's statement, published in full at Dealbook, "intense media attention" put Goldman in danger of violating U.S. securities laws. Now, that attention is only likely to grow more intense.

Will Goldman take Facebook public?

  • Yes

  • No

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