If this isn't a red flag.... sell sell sell!
Goldman to Cash Out $1 Billion of Facebook Holding in IPO
By Christine Harper - May 17, 2012 12:00 AM
Goldman Sachs Group Inc. (GS) and funds managed by the firm will sell about $1 billion of stock in Facebook Inc. (FB)’s initial public offering, cashing out almost half their stake after the social network doubled in value.
The investment bank and its funds will sell 28.7 million of the 65.9 million shares they own, more than twice the amount initially planned, Menlo Park, California-based Facebook said yesterday in a filing. The shares are being offered in a range of $34 to $38 apiece, meaning the stock being sold in this week’s IPO is valued between $975 million and $1.09 billion.
A gain on the investment may help validate Goldman Sachs Chief Executive Officer Lloyd C. Blankfein’s business model and a January 2011 transaction that threatened to undermine efforts to improve the company’s reputation after it settled fraud claims a year earlier.
Goldman Sachs created a special-purpose vehicle to bundle the holdings under one name and sell the stock to wealthy clients. That kept it from running afoul of securities rules mandating that companies with at least 500 investors meet Securities and Exchange Commission reporting requirements. Jon Stewart, discussing the deal on Comedy Central’s “The Daily Show,” joked at the time, “Oh Goldman, is there any regulation’s intent you can’t subvert?”
A document for potential investors disclosed that Goldman Sachs might sell or hedge its stake without warning clients, underscoring potential conflicts in the firm’s business model of investing its own money as well as advising clients. The bank eventually said that it canceled an offering of Facebook shares to U.S. investors amid concern that “intense media attention” may violate rules limiting marketing of private securities. Only offshore clients could participate in the deal.
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