If you've thought about quitting Facebook before due to privacy concerns... Well, another concern has just arisen.
The “great vampire squid” of finance, Goldman Sachs, has invested $450 million in the emerging great vampire squid of cyberspace, Facebook…. The Goldman deal may be an end-run around the rule, with Goldman not selling Facebook shares to its clients, but rather selling shares in something it (Goldman) owns. If this is the game, and if the SEC lets it happen, the 500-shareholder rule has become meaningless — and markets are all the more opaque at a time when transparency is more needed than ever. Opacity is a growing issue. A thriving shadow marketplace has emerged for big startups that haven’t done IPOs, so big that the Securities and Exchange Commission is, at least in that space, looking into the wheeling and dealing. For good reason: Many if not most of the investors in these markets have no idea what the true financial picture may be of the shares they’re buying.
Not only that, but it looks like this is an illegal deal with Goldman (we-took-your-tax-dollars-and-gave-ourselves-record-breaking-bonuses) Sachs! !
Zero Hedge reports:
Well, the capital injection that so duly empowers Facebook is basically an uncapitalized bonus pool for Goldman Sachs. You see, it is highly unlikely that Goldman is actually materially investing in Facebook, particularly at these valuations (is facebook really worth more than Time Warner and eBay, after the private market liquidity discount?). What Goldman is doing is employing its financial engineers to allow its HNW investors to sidestep and circumvent the laws of the land as feebly enforced by the SEC. Its not as if this is a secret, it was published in the NY Times!!! Basically, Goldman has created a spit in the face of the SEC, Facebook hedge fund.
But then again, Zero Hedge goes on to explain it all in one simple sentence:
You see, this is not about Goldman’s attempt to create capital gains through investment, its about their attempt to create income through commissions, fees and spreads.