Goldman Sachs Says No Facebook Shares For US Investors

theodp writes "In 2009, Robert Cringely speculated that the day might be coming when Goldman Sachs decides the United States isn't worth dealing with anymore. Crazy, eh? Maybe not. Blaming 'intense media attention,' Goldman Sachs has decided to exclude US investors from a $1.5 billion Facebook offering. In a nicely-timed all-investors-are-not-created-equal MLK Day statement, the US taxpayer bailout beneficiary said, 'Goldman Sachs decided to proceed only with the offer to investors outside the US....We regret the consequences of this decision, but Goldman Sachs believes this is the most prudent path to take.'"

Comments

Your fancy US Dollars

[Jeremiah Cornelius]

ARE WORTHLESS!

Re:Your fancy US Dollars

[Jeremiah Cornelius]

Warren Buffett and Ahmadinijad agree!

2009 http://www.zerohedge.com/article/here-why-dollar-now-effectively-worthless

2008 http://www.marketwatch.com/story/warren-buffett-says-us-dollar-worthless-if-account-deficit-persists

2007 http://www.msnbc.msn.com/id/21870271/ns/business-world_business/ ...

2003 http://www.indiadaily.com/editorial/12-16g-04.asp

Hey, if I had that many double-consonants in my full name, would I be rich, too?

Re:Your fancy US Dollars

[flaming error]

Your 2008 link has a misleading headline. The article quotes him as saying

"If our current account deficit keeps running at present levels, the dollar I think is almost certain to be worth less five to ten years from now compared to other major currencies,"

but the article headline misleadingly quotes him saying "worthless".

So to be fair to Mr. Buffett, "worth less" != "worthless"

Having said that, hopefully everybody here understands that a "dollar" has no intrinsic worth, nor is it backed by anything of intrinsic worth. So it is literally "worthless", but as long as people trade goods and services for it anyway, the great ponzi scheme goes on...

Re:Your fancy US Dollars

[fishexe]

Having said that, hopefully everybody here understands that a "dollar" has no intrinsic worth, nor is it backed by anything of intrinsic worth. So it is literally "worthless", but as long as people trade goods and services for it anyway, the great ponzi scheme goes on...

I can't tell if you're trolling or not. The worth of all forms of money has always come from people being willing to trade goods and services for it. Do you think the Sumerian clay tokens representing sheep and cows had intrinsic value? No, they were worth the sheep or cow someone had agreed to trade for them. Just as "worth less" != "worthless", so too "lacking intrinsic worth" != "worthless". Money always has extrinsic worth. That's what makes it money. Even money backed by gold and silver, and gold and silver themselves, are valued more highly than their intrinsic worth: they are demanded as media of exchange far above the demand for them for use in jewelry, electronics, et cetera, and the market bears a price for them far higher than if they were only valued for their intrinsic properties, in exactly the same way the market bears a higher price for US dollars than for the paper and ink that dollar bills are printed with.

Re:Your fancy US Dollars

[causality]

I can't tell if you're trolling or not. The worth of all forms of money has always come from people being willing to trade goods and services for it. Do you think the Sumerian clay tokens representing sheep and cows had intrinsic value? No, they were worth the sheep or cow someone had agreed to trade for them.

It's the difference between a fiat currency and a representative currency. The worth of the representative currency is determined by the amount of a real physical asset that is available.

The real difference is that there is a way fiat currency is commonly abused that doesn't happen with representative currency.

There is a built-in unsustainability caused by the private companies that issue fiat currency, like the Federal Reserve. When they create fiat money out of nothing, they loan it to the US Government in exchange for what is basically an IOU from the US Government. But they attach interest to each dollar they create. That means there are not enough total dollars in the system to pay back all of the debt. Therefore, the US Government cannot possibly pay back its debt. It can't ever do that, not even if the total federal budget were less than the tax revenues, because the money is loaned at interest the moment it's created.

The US Government has to borrow more money from the Fed, at interest, to make payments on the existing interest. Therefore, not only can it never get out of debt, the debt must also continue to increase.

Thus, fiat currency dollars don't represent wealth. They represent debt. If all debts were somehow paid off then there would be no money in circulation.

Even money backed by gold and silver, and gold and silver themselves, are valued more highly than their intrinsic worth: they are demanded as media of exchange far above the demand for them for use in jewelry, electronics, et cetera, and the market bears a price for them far higher than if they were only valued for their intrinsic properties, in exactly the same way the market bears a higher price for US dollars than for the paper and ink that dollar bills are printed with.

The difference is that representative currency dollars directly represent a specified amount of a tangible asset. They can be redeemed for that amount of that asset at any time. Their value cannot be lower than the value of that tangible asset. They represent wealth, not debt. If all debts were paid off under that system, you'd just have a lot of happy creditors. It's an inherently stable and sustainable system that doesn't require large amounts of built-in debt.

Unless some alchemists find an easy, dirt-cheap way to transmute worthless materials to gold, silver, or whatever the currency represents, then it has a value that can't suddenly disappear the way fiat currencies can (and have, several times throughout history).

Re:Your fancy US Dollars

[fishexe]

I can't tell if you're trolling or not. The worth of all forms of money has always come from people being willing to trade goods and services for it. Do you think the Sumerian clay tokens representing sheep and cows had intrinsic value? No, they were worth the sheep or cow someone had agreed to trade for them.

It's the difference between a fiat currency and a representative currency. The worth of the representative currency is determined by the amount of a real physical asset that is available.

I understand perfectly well the difference between fiat currency and representative currency. That doesn't change the fact that all currencies derive their value primarily from their exchangeability rather than their intrinsic worth.

The real difference is that there is a way fiat currency is commonly abused that doesn't happen with representative currency. There is a built-in unsustainability caused by the private companies that issue fiat currency, like the Federal Reserve. When they create fiat money out of nothing, they loan it to the US Government in exchange for what is basically an IOU from the US Government. But they attach interest to each dollar they create. That means there are not enough total dollars in the system to pay back all of the debt.

There was never enough gold in the US gold reserves to pay back all of the debt represented by gold-backed dollars either.

Therefore, the US Government cannot possibly pay back its debt.

What else is new? The US Government had debt it could not pay off long before Nixon took us off gold.

It can't ever do that, not even if the total federal budget were less than the tax revenues, because the money is loaned at interest the moment it's created. The US Government has to borrow more money from the Fed, at interest, to make payments on the existing interest. Therefore, not only can it never get out of debt, the debt must also continue to increase.

The Fed, from whom we are borrowing money at interest, is principally owned by the government and remits its profits to the US treasury (after doling out the appropriate share to member banks). I wish we only had to borrow from them.

Thus, fiat currency dollars don't represent wealth. They represent debt. If all debts were somehow paid off then there would be no money in circulation.

I'm pretty sure that's true of all moneys, everywhere. A piece of currency in my pocket represents somebody else owing me a debt, and it always has. Sometimes this debt has been denominated in a specific amount of a specific metal.

Even money backed by gold and silver, and gold and silver themselves, are valued more highly than their intrinsic worth: they are demanded as media of exchange far above the demand for them for use in jewelry, electronics, et cetera, and the market bears a price for them far higher than if they were only valued for their intrinsic properties, in exactly the same way the market bears a higher price for US dollars than for the paper and ink that dollar bills are printed with.

The difference is that representative currency dollars directly represent a specified amount of a tangible asset. They can be redeemed for that amount of that asset at any time. Their value cannot be lower than the value of that tangible asset.

It can if there's a crisis of confidence in the issuing agency's ability to cover their redemption.

They represent wealth, not debt.

All money represents debt. By definition money represents a promise to pay by somebody else; if it didn't, it wouldn't be money.

Re:Your fancy US Dollars

[jwdb]

currency which is intrinsically backed (i.e. coins) are always worth something, especially after whomever was backing the paper versions has faded into obsolescence.

Gold (or whatever you make your coins out of) has no intrinsic worth - the only reason we value it is because it is scarce and pretty. Given a world famine, try using gold to trade for something when all everyone wants is food. The value of that gold is determined by the demand for it, and if there is no demand...

And if you think gold will always be in demand, I'd like to point out the example of using shells as money, or any other ancient form of commodity money.

We should remember this next time

[h4rr4r]

We should remember this next time these assholes want a bailout.

Re:We should remember this next time

[h4rr4r]

If they were too big to fail, clearly they were too big to be allowed to survive. At the very least each one should have been broken up.

Re:We should remember this next time

[Dunbal]

The collapse of Iceland and the PIIGS has been enough to push the Eurozone to the breaking point.

Read a little more. Iceland did not bail out its banks, they let them fail (and were branded as terrorists by the UK for doing so). Iceland is NOT part of the PIIGS (the two "I"'s are Ireland and Italy). And curiously the countries that are struggling are the ones that DID bail out their banks. The economy of Iceland is actually growing again, which is more than can be said for "The Eurozone".

Re:We should remember this next time

[haxney]

...and note that the debt to GDP ratio of the PIIGS are *better* that of the USA. Compared to the PIIGS, the USA is a mismanaged banana republic.

This seemed fishy to me when I first saw it, and it turns out that this is way off. According to the 2010 stats of the CIA World Factbook, the US has the 36th highest (public) debt to GDP ratio at 58.90%. Here are the countries of PIIGS compared to the US:

• Portugal, 15th, 83.20%
• Italy, 8th 118.10%
• Ireland, 11th 98.50%
• Greece, 5th 144.00%
• Spain, 27th 63.40%

And, because it was referenced earlier,

• Iceland, 6th, 123.80%

So, rather than being worse than the PIIGS countries, the US has a lower public debt to GDP ratio than any of them, and, with the exception of Spain, is vastly lower. Also, note that the US's debt to GDP is lower than that of the UK (76.50%), France (83.50%), or Germany (74.80%). Now, that's not to say that this level of public debt is good, or that it shouldn't be lowered (it isn't and it should), but in terms of debt to GDP, the US is better off than most of the large European economies.

In my yard

[alexsoko]

Should have let them fail. Then they wouldn't be lending to any investors. If you want our money be ready to play by our rules.

Re:In my yard

[siddesu]

Who is this "we" you're talking about? You seriously think you (or any random amalgamation of US citizens) have more influence with Uncle Sam than GS?

Re:In my yard

[fermion]

And the foreclosure market would have been so screwed up it would not be likely that any bank could get enough coherent records togethers to foreclose.

So now, after millions of dollars in bonuses for executives who bankrupted the company, and hardly any money to normalize loans so that we would not neighborhood destroyed by foreclosed home, they spend money on this but lock out the people who paid for the bailout.

It could be that Facebook is at the point of Myspace, where the company is trying to cash in while it can. Goldman Sachs is trying to create a novel structure, much like the mortgage back security, in whih the real risks of the investment are hidden from the investor. This instruments sole purpose is to hide the innards of Facebook from investors. Because the money for Facebook is from the taxpayer, Goldman Sachs has almost no risk, just potential for commisions.

Re:In my yard

[Anonymous Coward]

Ironically, this is happening because they're playing by "your" rules.

SEC regulations prohibit banks from advertising or marketting private stock vehicles like the one that was created here. With all of the press of this thing, GS is concerned the SEC would view that as advertising/marketting, which would put them at risk of breaking SEC regulations.

The gotcha though, is that these regulations pertain ONLY to American Investors. So GS has decided that, in order to ensure that they're within "your rules", they can't sell these shares to Americans.

Hoisted on your own petard methinks...

-AC

Re:In my yard

[LibRT]

Yes - this explanation is spot-on. It's purely an attempt to avoid the decision by the SEC that the NYT article of Dec 2 (if I recall) about the offering constitutes a prospectus or is marketing (ie intentionally leaked by GS). Also, I'm pretty sure this offering is limited to a few high net worth individuals/hedge funds/etc, because Zuckerberg et al need to keep the number of public shareholders at or below 499 to avoid having to make a whole bunch of public disclosures and comply with other US regulatory nonsense designed to protect people from themselves.

Re:In my yard

[Dhalka226]

Also, I'm pretty sure this offering is limited to a few high net worth individuals/hedge funds/etc, because Zuckerberg et al need to keep the number of public shareholders at or below 499 to avoid having to make a whole bunch of public disclosures and comply with other US regulatory nonsense designed to protect people from themselves.

Yeah, but good news. Facebook found "one" investor willing to pay $1.5B. Of course that "one" investor is going to sell stakes in its "one" investment to hundreds or thousands of other people, but still. I mean, isn't that great? Facebook still has 498 slots open before they have to comply with "US regulatory nonsense" like, you know, informing would-be investors about how their company is actually doing. Fucking bunch of communists over at the SEC, man. Always stomping on small businesses like Goldman Sachs and companies valuated at $50 billion all on some ludicrous notion that investors should be informed as to what they might be investing in.

Re:So what GS is saying is....

[russotto]

The SEC has all sorts of regulations meant to "protect" the public. Goldman-Sachs is just trying to obey them.

oh really?

[Libertarian001]

We bail you out of from your greedy stupidity and this is your thank you? Looks like someone needs their corporate charter revoked.

Re:oh really?

[Concerned Onlooker]

I mostly agree with you. However, from the article:

"Under US securities law, if more than 500 investors hold a private company's shares, the firm is required to register with the SEC and file public statements.

The exclusion of US investors is unlikely to affect plans for Facebook to raise the $1.5bn, although it will mean some wealthy individuals and companies being denied a chance to buy into a fast-growing firm."

It kind of looks like the people who could really benefit from an IPO would already have been excluded. Just like always. So, I'm less inclined to be upset about this.

Re:oh really?

[Chyeld]

It kind of looks like the people who could really benefit from an IPO would already have been excluded. Just like always. So, I'm less inclined to be upset about this.

Given Facebook has all the hallmarks of being the next AOL and Mark Zuckerberg the next Steve case, I have a feeling that GS is doing the US a favor.

I guess the very people who bailed them out...

[geekmux]

...are now too good for them?

Man if that doesn't spell out the textbook definition of pretentious cocksucker, I don't know what does...

Nice selective editing!

[Bill, Shooter of Bul]

The missing part of the statement as reported by the wallstreet journel

Goldman Sachs concluded the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law.

Basically they think that offering it to us based investors may break a securities law. While they might be lying, it should have at least been in the summary.

A Way To Get Around Regulations

[cgenman]

The US has disclosure rules that protect investors in companies that have more than 500 investors. Goldman Sachs is creating a scheme where they are the singular investor, but then other investors buy into their shares of Facebook. This prevents Facebook from having to disclose certain information that is considered critical in deciding to invest in a company or not, and allows them to sell shares without informing the public about what they're buying.

This has been on the SEC's radar as potentially totally illegal, as it pretty blatantly is designed to get around this particular rule. The rule is there to protect small investors, and help create a more fair, less manipulated playing field.

Quite frankly, whatever Facebook will become in the future, the current valuations are crazy. This is protecting US investors from taking a bath, as the rule was intended to do in the first place.

Re:A Way To Get Around Regulations

[blackraven14250]

Jeez, WTF is with all you guys and the "Why don't they pay back their loans" bit? GS paid back their loans plus interest a while ago already.

Re:A Way To Get Around Regulations

[panda]

No. G-S are not "trying to be good guys." They are trying to make money in a scam investment in a way that is illegal in the U.S. They are obeying U.S. law to avoid being sued or whatever. This is purely a cover-your-ass move.

Re:A Way To Get Around Regulations

[Pharmboy]

You lack imagination. They owe more than the money they borrowed, any company that leaned on the taxpayer does. Any time a company wants to privatize profits but make losses at the risk of the public, there is a debt beyond cash.

Re:A Way To Get Around Regulations

[Pharmboy]

Not confused at all. They owe more than MONEY. You don't get that.

The fed isn't a fucking bank, we had to bail them out because of their own actions, and actions of like banks. What they owe is to move forward in a responsible way so we don't have to bail them out again. They owe the citizens a debt of gratitude. They operate in a free country, they owe it to us to operate ethically. Money isn't the only method for measuring the "quality" of a business. It is also not the only way to measure debt.

Re:A Way To Get Around Regulations

[antifoidulus]

Yeah, they paid us back largely with our own money. One of the biggest scams ever in the history of the united states seems to go largely unnoticed by the average man. While most of us are, legitimately might I add, up in arms about the bailout loans the much more sinister part of the baillout was the preferential interest rates banks got selling us our own debt. Essentially in order to spur lending the Fed was loaning money, with no strings attached of course, to banks at something like less than .25% APY. The banks, instead of lending the money opted instead to buy the very bonds that were issued to fund the loans and were getting about 2% APY on them. So essentially the bank was borrowing money from the Federal government at -1.75% interest, and the more they borrowed the more bonds were issued the more they could make. This was theft on almost unimaginable scales and yet it was completely legal! Its just fucking disgusting that they can pull this kind of shit, and hardly anyone complained. And yet you or I cannot get a -1.75% interest loan from the Fed. Only the uber rich are allowed to get them....fucking sick....

Re:A Way To Get Around Regulations

[antifoidulus]

Just because I think that 99.999% of Republican policy is absolute bullshit DOESNT mean I support the democrats on most economic issues. Almost all Republican and most Democratic economic policies have little to no empirical backing. I try to be as empirical as possible, for example I'm one of those people thats for public health care but against extending unemployment benefits. Why? Because public healthcare has been unequivocally proven to be much cheaper for both the individual and society as a whole than private health care. The numbers are there for all to see. However on the flip side extended unemployment does act as a disincentive to return to work, even jobs that people feel are beneath them(for the record, I am pro-unemployment benefits up to 1 year, after that you had better figure something out).

Re:USA a minefield?

[ya really]

From the past couple years, Id say if anyone gets the screwing by corporations and the government, it's the American Citizen, not the corporation. I'd say they have some sort of idea that Facebook has some sort of nasty liability (like not being worth nearly as much as they claim) that will cause them to get into more trouble like Goldman was at the start of the Economic Crisis.

Re:Where's my cheque?

[nevillethedevil]

I'm one of those evil immigrant types come to take your jobs and your women.

Re:Exodus, anyone?

[Anonymous Coward]

Ah, the day I deleted my facebook account, one of the most liberating things I have ever done.

It's a bit presumptions how they:
1) Assume you would rather "deactivate" your account (making it functionally identical to an active account AFAICT) and make you google for the actual "delete your account" link
2)Require a 2 week "pending deletion" period, during which if you log in you will cancel your request for account deletion.

Still, inconveniences aside, I would recommend account deletion to everyone. No longer will you receive dozens of invites a day to banal "spam to click" games from people you barely knew in school, no longer will you miss birthday drinking sessions because you were only ever informed via facebook (all e-mails from which going straight into your "failbook spam" folder) and no longer will you get hassle from the Mrs. when she finds out you accepted a friend request from a girl you used to date 15 years ago.

Free yourself from the tyranny of social retards today!

Re:Where's my cheque?

[h4rr4r]

Have you seen our women?
If you can afford to feed one, you can have one.

Like animals before an earthquake.

[orphiuchus]

Is anyone else noticing that all of those subhuman corporate entities and economists have been freaking out a lot lately? Making weird decisions, hiding under the table, chasing their tail, moving investments out of the US? I think they sense some incoming disaster that we humans wont see until its too late.

Good

[dachshund]

What Goldman was doing was essentially illegal in the US. Facebook is a private company and without opening it's books such a company can't take on more than 499 investors. To skirt this requirement Goldman was acting as a single "investor" but actually just planned to sell shares of it's stake on to it's clients (with hefty commissions). This is a violation of the spirit and possibly the letter of the law, and the SEC stepped in. To take the heat off Goldman is now going to run their scam outside of the US where presumably it's legal.

And yes, this probably is a scam. There are good reasons not to allow public investment in opaque ventures whose value can't be determined, and Goldman is clearly banking on charging oversized commissions because it's selling a product you can't get anywhere else (cause it's illegal, hmm). The first investors will make loads of cash just like in any pump and dump scheme, the suckers will get rolled. The Facebook guys get to cash out, turning some of those pretend billions into real dough before the company goes Myspace. Worthwhile tech ventures will go underfunded and even larger numbers of (dumb) investors will lose confidence in the markets.

Re:Good

[Z34107]

Going public means having to comply with Sarbanes-Oxley. Compliance is an entire industry unto itself, so the law of unintended consequences happens:

• Small companies can't afford to go public... so they don't. The IPO market is strangled, and Thee Little Guy is no longer regulated because he no longer exists.
• Large companies can comply... if they want to. SarbOx is expensive enough that a scheme like this is actually profitable in comparison. The Big Guy is no longer regulated, because he has an army of lawyers to smuggle his shares out of the country in their rectums.

Without SarbOx, something this complicated and dangerously-close-to-illegal would just be stupid, and Facebook would be publicly traded, with all the oversight that entailed. But, maybe all that extra regulation everyone's dodging already prevented a second Enron~

Re:Good

[dachshund]

Goldman values Facebook at $50bn. That's not some tiny startup that can't afford regulatory compliance. It's more than some huge publicly traded firms.

Now you might argue that this valuation is fantasy and I would not disagree. However, this high valuation exists because Goldman is running a scam. You can't simultaneously argue that Facebook is some poor startup getting squished by regulation and also that Goldman should be free to sell it to investors as a $50bn behemoth.

Re:Good

[Z34107]

I wrote that small businesses get squashed by regulation, but big businesses can avoid it. Why would you conclude, in an article about Facebook and Goldman Sachs avoiding regulation, that I thought both of them were "small"?

Re:USA a minefield?

[The O Rly Factor]

This actually sounds pretty plausible. Remember that Facebook is a company that is valued at more than 50 billion USD, yet pulls in 500 million yearly in revenue. If it turns out that Facebook is a bubble, GS and Zuckerberg might be able to cash out quick before the stock price cashes and burns, and not have to worry about any pesky insider trading or fraud investigations being brought up by the SEC. Remember that the holdings company GS set up for Facebook is registered in a generic foreign island tax haven country.

Re:So what GS is saying is....

[siddesu]

No, they are saying that the US has too many laws that bar advanced scams with securities, hence it is not very profitable to run such scams in the US.

But don't worry - it is very likely that whatever offer was going to be made would have excluded small investors outright; and that those US investors that would have been asked to consider buying into the fund have the offshore units that will allow them to do so now.

Multiplicity of Standards

[cosm]

Before everybody goes all gung-ho against G-S for this move, think of how many of you would also comment along the lines of "Who would invest in Facebook? It is just another bubble waiting to burst." I'm not qualifying anything there doing, I'm just sayin...

Re:Where's my cheque?

[nevillethedevil]

If you saw what I came from you'd understand :)

Yes GS is bad, but...

[GatorSnake]

And of course the post is immediately accompanied by the normal GS-bashing. Hate GS all you want, but this is a tangible example of the US losing its competitiveness to other jurisdictions due to its complex and outdated regulatory regime. Investment opportunities that could have been had by US investors will now go to foreigners. And yes many people think FB is overvalued, but that should be a personal investment decision, not something the government decides for you. This trend will make it increasingly difficult for companies to raise capital in the US. Not a problem for FB as they can source from anywhere, but smaller shops should definitely be concerned by this. And now back to the GS Is Evil channel...

Re:Yes GS is bad, but...

[h4rr4r]

No, open books are required for public investment. Otherwise an informed investment cannot be made. Capitalism requires informed actors, this is clearly a method around that. This just means the rules need to be changed so it cannot happen again.

Re:Yes GS is bad, but...

[shutdown -p now]

And yes many people think FB is overvalued, but that should be a personal investment decision, not something the government decides for you.

The whole point of the law that G-S is so afraid to run afoul of is to ensure that people making those personal investment decisions actually have sufficient information to make a meaningful decision, rather than a gamble.

Re:Yes GS is bad, but...

[Cogneato]

Selling lead-laced consumer goods is bad, but...
Child labor is bad, but...
Dealing in sex slaves is bad, but...

Just think of all of the other ways that the US is losing its competitive edge due to its complex and outdated regulatory regime. If only we could get rid of all of those pesky laws, we could finally make some real money... maybe even become the world's richest country.

Re:Yes GS is bad, but...

[fishexe]

Wow, a voice of reason in the middle of a mob

Not really. It would be more appropriate to say that about all the people pointing out that GS is basically doing us a favor by not offering it here because it's almost certainly a scam. GP is basically saying "Oh Noes! We are losing investment competitiveness b/c our gov'mint won't allow scams!" but without admitting the scam part.

Re:Yes GS is bad, but...

[fishexe]

Yeah, small businesses in America will be really hurt by their inability to legally scam investors. Real lack of competitiveness on our part, right there. Shit! We're missing out on the investment scam market!

There are a lot of legitimate reasons to say the US is losing competitiveness. This is not one.

Re:Yes GS is bad, but...

[jjohnson]

Are you serious? Are you for real?

The deal is a minimum $2MM buy-in to get shares in a private company that doesn't have to tell you anything publicly (i.e., there's no independent verification of anything they're saying in the pitch) and that peaked a year ago, meaning its sole asset (i.e., users and credibility) is on the downslope. You're locked in for two years, while GS takes 10% off the top in fees and cash deposit, and they can walk at any time.

GS decided to not offer the deal to American investors because it would have tripped a regulation that says that, if you have too many private investors, you're acting like a publically traded company and must disclose like one. That's the complex and outdated regulation that you think is holding back America?

Looks to me like the SEC saved a bunch of American more-money-than-brains nouveau riche from getting held down and sodomized by a bunch of GS traders who are spilling their scotch on you because they're laughing so hard.

Anyone who takes this deal is paying huge for a massive ass-reaming

Re:Yes GS is bad, but...

[jjohnson]

Why must open books be required for public investment?

Because the government, in its wisdom, realized that people actually fall for con men's tricks, so they try to outlaw the more obvious ways of grifting people. In the case of the stock market, the people falling for the con have all the money in your parent's 401K in their pocket, so this is more than just protecting the trader.

Why does it bother you that Person X might invest in Person Y's venture?

It doesn't bother anyone for X to invest in Y's venture. It bothers (or should bother) everyone when a scam artist gets away with it.

If you want to piss away your cash on three card monte, there's still plenty of opportunities around for you to get screwed.

Re:Yes GS is bad, but...

[multiplexo]

Whenever I hear a libertarian bitching about "complex and outdated" regulatory regimes I do two things, reach for my gun and hold on to my wallet, because I know that I'm about to get ripped off and fucked over by a scam artist. Yeah, isn't it wonderful how we got rid of all of those "complex and outdated" regulations like Glass-Steagall and reasonable capital ratios? Why we've just benefitted so much from the trickle-down effect, oh wait, that's not trickle down, that's just some bankster pissing all over me.

Re:So what GS is saying is....

[flyingkillerrobots]

Maybe it's the opposite. Who knows? Maybe they actually think they woefully overvalued Facebook and decided they only want to screw over the foreigners.

Re:So what GS is saying is....

[Anonymous Coward]

Goldman-Sachs is just trying to CIRCUMVENT them.

There. Fixed that for you.

Re:So what GS is saying is....

[jrumney]

The SEC regulations for offering shares to US investors are a lot stricter than for non-US. My guess is that they cannot meet the requirements, which I would take as a big red flag that Facebook is severely overvalued right now.

Re:So what GS is saying is....

[tm2b]

And, they probably -are- protecting the public in this case...companies should not be allowed to sell shares to the public without disclosing important information about themselves.

Maybe this is the future growth export industry in the US: securities fraud of foreign nationals.

Re:USA a minefield?

[flatt]

100x earnings... yeah, no bubble here.

Re:So what GS is saying is....

[Dunbal]

A banker with a conscience? Hahaha that's the best joke I've heard all night.

Re:USA a minefield?

[Angst Badger]

If it turns out that Facebook is a bubble[...]

If?

I have to wonder -- given their past behavior -- if GS is juggling its various independent business entities so that one entity can offer the IPO while another entity shorts the motherfucking hell out of it. The actual reality would undoubtedly be more complex than the non-gnome population could readily understand, but I wouldn't be surprised if, once all the layers of obfuscation are peeled away, that's what it boils down to.

In any case, Facebook really doesn't have a whole lot of room to grow, and it's ripe to be friendsterized by someone in the next wave of social networks. Live by the social trend, die by the social trend.

Re:Exodus, anyone?

[walshy007]

There are three primary things that facebook is useful for imho, first is the chat system which is xmpp based (open standard, gtalk etc uses it too) which everyone uses so many friends that do not use other IM system such as msn, aol etc are available to talk to.

Next is the event system complete with iCal support, friends can invite me to events and it will magically appear with details on my android.

Finally where facebook started, photo sharing and tagging, the ability to quickly share things with friends by simply uploading them.

The value comes from the ease of use of sharing information. But of course, this comes with the caveat that you should only put information on there that you _want_ to be shared.

Re:USA a minefield?

[h4rr4r]

You are wondering?

I would be willing to guarantee they are doing something like that.

Re:So what GS is saying is....

[icebike]

The SEC has all sorts of regulations meant to "protect" the public. Goldman-Sachs is just trying to obey them.

LOL... Having been suckered into too many IPOs I agree. Thanks for looking out for us Goldman!

Seriously people, why would you want to buy this? Zuckerman and friends are multi multi millionaires. They did it pretty much by starting with nothing. This is just their chance to cash out before the thing heads south. If they saw much more upside, would they be selling?

 

Re:So what GS is saying is....

[SpecBear]

This is what I find really worrisome. As a regulatory body, the SEC is kind of a joke. The bankers can and do get away with almost anything. For GS to exclude the US from the Facebook offering, this has to be a screwjob of such magnitude that even the SEC would have to act.

Re:Exodus, anyone?

[Eil]

I know Facebook hating is en vogue around here, but c'mon.

1) Assume you would rather "deactivate" your account (making it functionally identical to an active account AFAICT) and make you google for the actual "delete your account" link

Click "Account" -> "Help Center". The top question is "How do I permanently delete my account?" The description clearly states the difference between deactivating vs deleting your account. (Deactivating makes your profile disappear from Facebook, but all of your data is held on to in case you want to reactivate.)

2)Require a 2 week "pending deletion" period, during which if you log in you will cancel your request for account deletion.

So... don't log in?

No longer will you receive dozens of invites a day to banal "spam to click" games from people you barely knew in school,

You can disable all of those, and you can also unfriend annoying people, just as you can in real life.

no longer will you miss birthday drinking sessions because you were only ever informed via facebook (all e-mails from which going straight into your "failbook spam" folder)

Step 1. Send all Facebook notification to spam folder
Step 2. Complain about not receiving Facebook notifications

Huh?

no longer will you get hassle from the Mrs. when she finds out you accepted a friend request from a girl you used to date 15 years ago.

If that actually happened, Facebook isn't the biggest problem in your relationship.

Meaningless For "Qualified" Investors

[cmholm]

I contend that for any of G-S' target US customers, moving the sale outside of the US is meaningless. The sale was aimed at high net-worth individuals, and just about any of these people (or their portfolio manager) will be able to participate via their off-shore accounts. The action in the usual off-shore banking establishments, or even through US citizens' above board overseas accounts, will probably prove heavy.

This action is strictly to put off the day of reckoning with the SEC.

Re:So what GS is saying is....

[guruevi]

What it is is a scheme to get our taxpayer money which we bailed them out with last years out of the country. They invest in a big bubble once more, this time with their bailout money, invest in it from outside the country using shills (so it can't get scrutinized by the local authorities) and then bust the bubble after transferring out all the cash.

Re:So what GS is saying is....

[PopeRatzo]

G-S are running the government. How long before someone puts out a list of their executives names and addresses with a "surveyor's mark"?

How long before someone puts out a list of their executives names and addresses along with their offshore bank accounts that they use to hide money from the IRS?

Oh wait...

You might want to mention this story the next time someone tries to blow some "supply-side economics" smoke up your ass. "Trickle-down" indeed.

Re:So what GS is saying is....

[jkyrlach]

To: Ugandan Upper-class houshold Dear Sir or Madam, I am a Goldman Sachs Broker in the United States of America. We have been fortunate enough to aquire many millions of dollars in private Facebook stock, but because of govt. red tape, we cannot sell it here. If you would be kind enough to put 25000 in a foreign account and give us that info, we can make sure you get in on this once in a lifetime opportunity! Your American counterparts, Goldman Sachs

Re:What's the bottom line?

[PopeRatzo]

So what, I get some foreign proxy to buy me some? Is there really a difference?

You've got to do a lot more than that. These shares are probably not going to get to the retail brokers at all. They'll get divvied up between the big banks and the investment houses to be distributed to their most favored customers.

I can pretty much guarantee that whoever you are, you are not one of their "most favored" customers.

Re:So what GS is saying is....

[hairyfeet]

Why would you want to buy this? I'll tell you why: Because that first week or so the sheep will cause the price to shoot like a rocket (because they have heard of FB and know it is big) before it crashes hard when reality sets in. Kinda like how you can make a mint on a "pump and dump" if you get in at the bottom and drop them right before it starts to freefall.

But frankly when I hear the words "evil corporation" I automatically think GS. They are the kind of slime that ruin everything they touch while engorging themselves at the same time. Look at their history and you'll see bubbles as far as the eye can see going back almost to its foundation. Frankly the best thing we here in the US could do for the world is dissolve GS and throw as many of those swindlers under a jail as possible, but sadly our government is riddled with GS "alumni" that make sure their beloved GS ALWAYS comes out ahead. GS is living proof that even after 200 years the words of the great Thomas Jefferson still ring true. How sad that all those years ago he could see the truth when so many today simply bury their heads in the sand and scream "free market!" as the answer to all of the USA's ills.

Re:So what GS is saying is....

[PopeRatzo]

It wasn't the "European banks" that got hurt from the mortgage-backed bunkum. They were made whole to the tune of 100 cents on the dollar. The people who are paying for it are the same ones that are paying for it over here. You and me. Our parents. Our kids.

They are creating a "breakaway" culture, who within decades will be the only ones with access to capital, to new technologies, to advanced health care. That's the ultimate effect of the dramatic increase in wealth disparity. Fifty years of this and they'll be as far ahead of the rest of us as the American settlers were of the Native Americans. When two cultures exist side-by-side and one is so far in advance of the other, it doesn't work out well for the ones on the bottom. We are seeing evolutionary branching based on wealth alone.

If you were wondering how bad the deal is

[LeperPuppet]

This article gives an overview of what Goldman Sachs will be giving investors and it isn't pretty.

The investor needs to put in at least $2mil and GS will take 4.5% in fees and another 5% of any profit earned. The real kicker is the investors can't sell until 2013, while GS reserves the right to cash out whenever they want without giving any warning. If the share price drops, GS will happily bail out, leaving their customers holding the bag. Again.

Overall it's an awful deal, unless you have a lot of cash to burn and somehow think that the Facebook of 2013 will be worth more than its currently overpriced 2011 version.

Re:So what GS is saying is....

[Kreigaffe]

To be an effective trader, basically what you do is step in to a transaction between two people and shove them far enough apart that they can't communicate. Then you go to the seller, tell them that you and your buddies are their only market and you will pay them $XYZ for everything they have. A real low-ball figure. Do your best to put them in the fucking poor house.

You then take whatever you bought to the person who was already interested in buying it, and tell them you and your buddies are the only source for whatever it is you bought, and if they want any of it they'll have to pay you $XXYYZZ. An absurdly overvalued figure. Do your best to put them in the fucking poor house.

What's going on is that traders at no point are about facilitating exchanges between two parties. Every step of the way, their goal is to screw everybody who's still holding a single red cent so hard that their fillings fall out, and then collect those fillings -- gold, too, is an investment.

I take this as a sign Facebook is about to go away

[techsoldaten]

I bet 100% of the investors are going to short that stock big time. No way I am buying into the eventual public IPO.

When Facebook goes public, it will the very definition of a bubble. The company's tangible physical assets are probably less than $500 million. In some objective sense, they are measuring value based on the actual number of Facebook users.

This means they are dependent upon the interest of users to maintain that value. So was AOL, so was Compuserve, so were a lot of other things that lost a lot of value in a very short time.

I get the same sense I did when I saw the AOL deal go through. WTF, this cannot be right. I can't tell you what kind of game changing, cataclysmic innovation is going to affect their value, but it's going to emerge.

Re:So what GS is saying is....

[LordNacho]

And, they probably -are- protecting the public in this case...companies should not be allowed to sell shares to the public without disclosing important information about themselves.

  Maybe this is the future growth export industry in the US: securities fraud of foreign nationals.

Future growth industry? Dude, in the industry everyone knows not to touch US onshore investors. It's too messy in terms of documentation, and it gives the SEC powers to look at your investors from other countries. Everything US is done via offshore entities to prevent this. I'm surprised everyone thinks this is news.

Re:Do US people need protection from US gov't

[Frangible]

I'm all for capitalism, but regulations exist for a reason... usually as a reactionary measure to massive abuse.

In this case, they're right. The valuation is ridiculously excessive relative to their annual revenue, and I fail to see how being deprived of getting scammed is destroying America. Does anyone honestly think Madoff getting busted was a threat to liberty? It's a bit sad we let them take foreign investors like that, but hey, I guess that at least benefits the US economy, right?

I also find it quite ironic that a company that has abused end-user privacy so casually expects a great deal of privacy for themselves.