Will Goldman's Facebook Investment Survive SEC Scrutiny?

Lora Bentley

Goldman Sachs joined a Russian investor early in this new year to infuse Facebook with $500 million in cash. The deal values Facebook at $50 billion, and the company now has money to hire the best employees, develop new products and services, and "possibly pursue acquisitions," according to The New York Times.


And Facebook gets all of that, writers Andrew Sorkin and Evelyn Rusli point out, without the burden of government regulation that comes with an IPO. In fact, according to another New York Times piece, the biggest benefit of the deal for Facebook is that it allows the company to delay the IPO significantly.


Dealbook blogger Miguel Helft writes:

And so a young mogul like Mr. Zuckerberg, the world's youngest billionaire at age 26, can enjoy many of the benefits of going public without having to tie the knot with Wall Street. ... [He is] in no rush to go public and no longer need[s] the bragging rights that a stock offering used to bestow.

But remaining private does not guarantee Facebook will remain free of government scrutiny, as The Wall Street Journal's Ashby Jones observes. In fact, Jones wonders aloud whether the Securities and Exchange Commission will take a closer look at the Goldman Sachs transaction-especially since Goldman has invited key clients to invest in Facebook.


Jones writes:

The SEC requires any company with more than 499 investors to disclose certain financial information. But some private companies seek to avoid crossing the disclosure threshold by funneling investors' funds through a single entity, such as a private equity firm or hedge fund.

Whether Goldman's investment pool is intended to get around the rule, then, is the key.

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