Goldman, Zuckerberg and Facebook: Taking No Prisoners

One of the Oldest investment banking firms pairs up with the youngest billionaire in the world to form a strategic alliance of huge proportions.
Goldman Sachs is in the news again regarding a questionable transaction involving Facebook. The 26-year old billionaire, Mark Zuckerberg is the beneficiary of Goldman’s creative financing, while SEC Chief Mary Shapiro is being prodded to investigate by New Yorker's John Cassidy. Apparently Goldman established a “Special Purpose” vehicle to create an opportunity for its high net worth clients to invest in Facebook, which is not yet publicly traded. This is raising eyebrows and even concern. Why? Because the SEC requires companies with more than 499 investors to disclose their financial results to the public. To get around this provision, Goldman’s "best and brightest" have hatched a Special Purpose vehicle which establishes Goldman Sachs(fund manager) as “one” investor, who could be pooling investments from thousands of clients. Nice Work.

Facebook ‘s valuation was estimated to be $50 billion, which is more than EBay Inc.’s value of $39.3 billion , placing it third in the competitive internet businesses, just under Amazon ($74.4 billion) and Google ($192.9 billion). This makes it official: social-networking is serious business, attracting over a half a billion global users and more advertisers than ever imagined 6 years ago.

According to the Huffington Post , a Georgetown University professor, James Angel, opines that the special purpose vehicle can still be ruled illegal if it can be proven that it was specifically designed to circumvent the SEC rules. The Times reported that the SEC is “looking into” the hot trading market of privately held shares of networking sites. Given the backlash the investment bank suffered last year, I can't see the legal minds at Goldman leaving any room for more legal battles and negative press.

The Goldman and Zuckerberg combo is more likely to be poised for massive success, rather than trouble from the SEC. Time Magazine names Mark Zuckerberg "Person of The Year" However, I would not be surprised if media pressure forces the SEC's hand to launch an official probe.

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K Reilly
Cohn-Reilly Report

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Anonymous said......

Extraordinary submit! Will you follow-up on this specific matter?
January 9, 2011

________________Comment
K. Reilly said...
Yes, I will be following up on this matter. This is certainly an intriguing set of circumstances, so it would be interesting to see how the dynamics of this liaison plays out. Wow...I think I have the heading for the follow-up article: Dangerous liaison.
Anyway, thanks - your feedback is much appreciated.
January 9, 2011

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