Goldman cuts US investors from Facebook deal, blames the media

Goldman Sachs today revealed a big change to its private offering of Facebook shares — it’s only making the deal available to investors outside the United States.

In a statement released to the Wall Street Journal and other publications, Goldman (in what I believe is its first public comment on the deal) said it made the decision in response to “intense media attention”, leading the firm to decide that “the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law.”

It seems that the deal, where Goldman is offering its clients a chance to invest up to $1.5 billion total in the social networking company, was so widely publicized (because reporters got wind of the deal and covered it constantly) that it started to look less like a private investment and more like a public offering. The firm also told the Journal that the move wasn’t “required or requested” by the Securities and Exchange Commission or any other organization, but an SEC crackdown may have seemed likely since the agency is already looking into the sale of private company shares (including Facebook’s) on secondary markets. So rather than deal with US regulation, it’s keeping the deal overseas.

Goldman should still be able to raise the money, since interest in the deal was so great that the firm had to turn investors away. However, The New York Times notes that the majority of Goldman’s high-net-worth clients are based in the US, and it argues that the change could hurt the firm’s relationship with Facebook, which in turn might diminish the odds that Goldman would lead Facebook’s public offering, which is expected in 2012.

The firm also invested $450 million on its own into Facebook at a valuation of $50 billion.


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