Goldman was reportedly aiming to raise $1.5bn for the company but had received orders for $7bn.įoreign investors are not covered by the same rules and will still be able to participate in the Facebook offering.
The move will also be a blow to Facebook. Goldman was flooded with requests for shares. The restrictions proved no barrier to the appetite of the bank's US clients. Its clients were reportedly told they would have to pay a minimum of $2m to invest and would be prohibited from selling their shares until 2013. The move is a major embarrassment to Goldman. We regret the consequences of this decision, but Goldman Sachs believes this is the most prudent path to take," the bank said in a statement. The decision not to proceed in the US was based on the sole judgment of Goldman Sachs and was not required or requested by any other party. "Goldman Sachs concluded that the level of media attention might not be consistent with the proper completion of a US private placement under US law. While Goldman never commented on the private placement, the bank's officials believe the "intense media attention" that the deal generated around the world was threatening to scupper the deal in the US.Īmerican law prohibits "general solicitation and advertising" in private offerings, banning banks from promoting an offer by taking out advertisements or communicating with media outlets.Ī Goldman representative said that the media coverage could have been interpreted by regulators as marketing and publicity in contravention of private placement rules. It subsequently transpired that Facebook was planning to address the 500 rule itself by going public or publishing full accounts. The plan was widely seen as a way to circumnavigate rules that restrict to below 500 the number of US shareholders a private company can have. The bank planned to set up a "special purpose vehicle" to allow its clients to invest in Facebook. The deal was a major coup for Goldman, which appeared to have found a way to get its clients in first. The seven-year-old company has more than 500 million users and recently passed Google as the most visited site on the web. Facebook is probably the hottest property on the planet at present.
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