Apparently, the powers that be over at Goldman Sachs have been watching The Social Network. The bank has invested $450 million in Facebook along with a $50 million contribution from a Russian investment firm. That’s a solid $500 million for Mark Zuckerburg’s brainchild.
Private Cash, Private Company
Along with the cash come implications. Facebook is still a private company, and its CEO has rejected curiosity about an upcoming IPO with a clear “Don’t hold your breath.” Considering that an Initial Public Offering is usually undertaken with the aim of accruing more liquid capital, the influx of cash into this still-private company might very well eliminate the need for an IPO and keep the business in Zuckerburg’s hands.
All For One, And One For Facebook
The investment—and Goldman Sachs is “considered one of Wall Street’s savviest investors,” according to the NY Times—is also making waves because the post-recession SEC is on red alert for insider trading and other potential Wall Street scandals. The bank is expected to raise about $1.5 billion from new investors, and is establishing a “special purpose vehicle” (think fund) which will combine the funds of high-net worth investors to be regarded as one whole investment, managed by the bank. This move is a deliberate one, as SEC regulations require public disclosure of financial results from companies that have more than 499 investors. By combining its high-net worth investors into one investment, Goldman and Facebook could lessen their number of investors and skirt this rule. Do you think the SEC will allow it?
What Does Goldman Know?
Fortune speculates that Goldman’s colossal investment may indicate “a look behind Zuckerburg’s financial curtain” that cemented the bank’s willingness to gather an eventual total of nearly $2 billion for a company Business Insider calls “the most important site on the internet.” Of course, suspicion is bound to surface when a deal of such magnitude is undertaken, especially when it features both our contemporary golden child and big bad Wall Street. Now that they’ve joined forces, the financial world is indeed holding their breath for a Facebook IPO, but we’re much as we were: playing Farmville.
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