14 DAY TRIAL // Would be Facebook investors in the US are out of luck as the one opportunity most had of buying a chunk of the social network before its initial public offer is gone. Goldman Sachs is only allowing non-US clients to invest in the "special purpose vehicle" it's creating for Facebook, apparently in a move to try to avoid any scrutiny from the Securities and Exchange Commission.
Facebook's dealings in the financial world seem to be as interesting as any actual feature the site may be introducing lately. The big news in recent weeks in this department is Facebook's $50 billion valuation, based on Goldman Sachs' recent investment.
The bank invested about $450 million in the company, in a $500 million round, in which the Russian DST also contributed. Incidentally, DST is now the largest venture capital investor in Facebook with an estimated 10 percent of the company.
Along with putting in its own money, the bank also enabled its most valued customers to invest their own, through Goldman's, in a 'special vehicle' which would add another $1.5 billion to Facebook's coffers.
According to people with knowledge, the special vehicle was greatly oversubscribed, indicating the level of interest in Facebook at the moment.
However, the move was raising more than a few eyebrows since it would effectively enable a large number of people to invest in Facebook, a private company.
Laws in the US require any company with 500 or more investors to disclose financial reports and other information. This would essentially force Facebook to go public.
Goldman's special vehicle could avoid this since the bank would be the only investor in Facebook, in the books, and would handle the money of its clients which wouldn't be able to sell any of their shares, even if the company went public, before 2014.
Now the bank is saying that it has decided to allow only foreign investors, but claimed that it came to decision completely independently.
"Goldman Sachs concluded the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law. The decision not to proceed was based on the sole judgement of Goldman Sachs and was not required or requested by any other party," Goldman Sachs said in a statement.
"Goldman Sachs regrets the consequences of this decision, but we believe this is the most prudent path to take," it added.