January 17, 2011

Goldman Sachs Excluding US Facebook Investors

According to Goldman Sachs, it will limit its private placement of shares of social networking site Facebook to investors outside the U.S., citing "intense media coverage" as the reason.

"The level of media attention might not be consistent with the proper completion of a US private placement under US law," the New York securities firm said in a statement to the Wall Street Journal.

The Journal reports, citing "people familiar with the situation," that Goldman started to notify clients of its decision on Sunday in Asia, and clients in Europe and the U.S. were being told on Monday

According to the Journal, Goldman's decision "suggests that executives grew concerned that huge interest in the offering could expose the securities firm to regulatory vulnerability."

It said that private placements like the Facebook deal are subject to strict U.S. Securities and Exchange Commission (SEC) guidelines.  The SEC has already reportedly opened an inquiry into the offering.

Goldman said in a statement that the decision to limit the Facebook offering to non-U.S. "offshore" investors was not "required or requested by any other party," including the SEC.

According to the report, a total of about $7 billion in orders for Facebook shares has poured in, and Chinese demand is especially strong.

Facebook has been in the limelight since U.S. media revealed that Goldman Sachs had invested $450 million in the company, along with a $50 million investment by Russian firm Digital Sky Technologies.

The deal values the California-based Facebook at $50 billion, which is more than companies with much larger revenue.

Facebook is the largest social network in the world, holding nearly 600 million users around the world.

The New York Times said the withdrawal of the offer to U.S. investors was a "major embarrassment" for Goldman.

The Journal said it may "also deal a blow to Goldman's relationship to Facebook and the firm's prospects of leading the social network's long-awaited initial public offering, expected in 2012."


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