Facebook: Search to avoid IPO is down with Goldman Sachs

By Richi Jennings. January 4, 2011.

Mark Zuckerberg hates Wall Street and SEC regulation. Is that why he's thrown his hat in with Goldman Sachs and Russian investors Digital Sky Technologies? But the Facebook search for independent capital may put it in conflict with the Feds. In IT Blogwatch, bloggers are down with that.

Your humble blogwatcher curated these bloggy bits for your entertainment. Not to mention How they catch arsonists in England...
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Grant Gross gets going:

Goldman Sachs has invested $450 million in Facebook, and Digital Sky Technologies, a Russian investment group, has invested $50 million, in addition to earlier investments. ... Goldman Sachs plans to allow its clients to invest in Facebook through its investment.
...
Meanwhile, the SEC has opened an inquiry into private shares trading at Facebook [and others]. ... The focus of the SEC inquiry is unclear, but ... the agency may be interested in a rule that limits private companies to fewer than 500 shareholders. ... It's possible that the 500-shareholder rule could push Facebook into an initial public offering, or rein in shareholder investment.

Miguel Helft and Claire Cain Miller explain:

Facebook hopes ... to delay an initial public offering ... allowing it to remain free of government regulation and from the volatility of Wall Street. ... Perhaps more than any company founder ... [he] has frequently expressed his disinterest in Wall Street. ... The deal ... would also allow Mark Zuckerberg, the company’s chief executive, to retain near absolute control.
...
Lots of people would stand in line to buy shares in Facebook, but for now, only an exclusive few — wealthy clients of Goldman Sachs — will be able to. ... The deal with Goldman values Facebook at ... $50 billion.

   
David Kirkpatrick picks up that ball and runs with it:

Why do companies go public? ... To raise capital to expand operations and to offer liquidity to hardworking employees. ... Yet both of those goals will be achieved for the time being, with the deal Goldman has arranged for Facebook.
...
Facebook will gain up to $2 billion in additional capital for expansion, hiring, acquisition, or whatever other strategic challenges emerge as the once-upstart increasingly goes toe-to-toe with the biggest Internet and tech companies, like Google and Apple.

 
Mathew Ingram asks, "will it be good for investors?":

The current tech-investing bubble ... is different from the one that popped so spectacularly in the late 1990s, because the current version exists ... in the private sector. ... The activity is occurring in secondary markets such as SecondMarket.com, or through private investment funds and financing rounds. ... There have been no moon-shot public IPOs that flamed out within days or weeks, no Pets.com or similar issues to raise warning flags.
...
If nothing else, the Facebook deal is likely to increase the SEC’s interest in looking at the behavior of such private investment vehicles. ... Goldman’s involvement virtually guarantees that this will soon spill out into the public markets. ... Will Facebook be the new star of the technology sector ... or will it become a symbol of how over-inflated expectations have become?

 
While David Weidner doesn't mince his words:

Talk about an evil axis. We haven’t seen an incongruous alliance like this since Iran-contra, since Sammy Hagar joined Van Halen, since or Apple ... tied its future to AT&T. ... Someone here is going to get rich. ... The phrase irrational exuberance comes to mind. Then again, rationality isn’t important to Wall Street. ... Making money in the margins is.
...
You have to wonder how hard up [Facebook] is for backers that it would choose to ally with the Evil Empire. Then again, who turns down an investor willing to set the bar at ... a bigger market value than Boeing ... General Mills ... and Morgan Stanley.

  
But Brett Arends says the "valuation is insane, but not crazy":

A lot of people are taking this deal as a further sign of an Internet “bubble.” ... But investors may be overlooking one timeless principle: Nobody ever went broke underestimating the intelligence of the public.
...
It has more than 500 million users, and more than three-quarters of them are overseas. ... More than half of users log on every day. ... Facebookers waste ... 700 billion minutes on this website every month. ... No kidding. That’s roughly the equivalent of ... three eight-hour workdays, every month. ... In this context, the Goldman deal doesn’t look quite so crazy.

  
And Finally...
How they catch arsonists in England
 
 
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Richi Jennings is an independent analyst/consultant, specializing in blogging, email, and security. A cross-functional IT geek since 1985, you can follow him as @richi on Twitter, pretend to be richij's friend on Facebook, or just use good old email: itbw@richij.com.

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