Goldman-Facebook Investment Vehicle Already Full; SEC Eyes Disclosure Rules
Goldman Sachs has already received “several billion dollars” worth of commitments to its “special-purpose vehicle” for investing in $1.5 billion worth of Facebook stock, according to The Wall Street Journal.
Goldman is asking Facebook to expand the number of shares available through the deal, which may depend on the amount of interest among Facebook employees in selling their personal stock at this time. (Before the Goldman deal, employees were prohibited from selling shares, though they were able to do so for a short time last year as part of a deal with Digital Sky Technologies.)
Goldman plans to stop soliciting interest in the project on Thursday, according to the Journal. Only wealthy individuals and a few hedge funds and private-equity firms have been asked to participate, with a minimum investment of $2 million for people who do not work at Goldman.
Meanwhile, the interest of the Securities and Exchange Commission has been piqued by the Goldman deal, which was structured to avoid adding shareholders to Facebook’s fastidiously maintained count. The company has carefully avoided having more than 500 shareholders to avoid SEC disclosure rules.
It had already been reported that the SEC was looking at the recent growth of secondary market trading of shares in private companies, with some assuming that such an inquiry could lead to the practice being shut down.
However, The Wall Street Journal now reports that the agency is studying whether the 1960s-era disclosure regulations for private companies need a rewrite. That has some on Wall Street wondering whether the SEC inquiry could “open the floodgates” for similar deals, where “hybrid” companies are private yet have their shares traded in a limited way.
The idea that wealthy Goldman clients are the only ones able to invest in Facebook, a company with some 600 million users, doesn’t sit well with many people. BoomTown’s Kara Swisher yesterday described the Goldman-Facebook deal as “sneaky,” “elite” and “opaque.”
Some Goldman clients complained that they were given too little time and information to evaluate the Facebook opportunity, which only emerged this past weekend. Apparently enough of their cohorts did not feel that was the case.
Please see the disclosure about Facebook in my ethics statement.