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Did Blogs Exercise Enough Influence To Alter Goldman’s Facebook Plans Or Did The SEC Decide To Get Serious?
After hearing of Goldman’s plans to allow investors to skirt SEC
guidelines and issue private shares of Facebook to the public, I had a
plethora of warnings and admonitions. Once I (and my best analyst) took
the time to parse the numbers and the logic behind the deal, I concluded
that
Facebook Registers The WHOLE WORLD! Or At Least They Would Have To In
Order To Justify Goldman’s Pricing: Here’s What $2 Billion Or So Worth
Of Goldman HNW Clients Probably Wish They Read This Time Last Week!
In a nutshell, not only is the offering unlawful on its face
(although probably lawful due to the financial engineering cum law
splicing from the wizards at Goldman), the valuations were simply stuff
of fairy tails and dot.com implosions.
I offered a detailed and illustrative valuation exercise to the professional/institutional (read as, HNW) blog subscribers (
FB note final)
and as was usual included a material dollpp for the public blog to
chew on. I think many found it quite the engaging read, at the very
least.
Well, it appears as if maybe someone at the SEC may have gotten
pissed off enough to say “I’ve had it and I’m not going to take
anymore!!!!” From the Wall Street Journal: Goldman to Exclude U.S. Clients From Facebook Deal:
Goldman Sachs Group Inc. decided to
exclude U.S. clients from the private offering of as much as $1.5
billion in shares of social-networking company Facebook Inc., citing
“intense media attention.” In a statement provided to The Wall Street
Journal, Goldman said the move came after officials at the New York
securities firm “concluded the level of media attention might not be
consistent with the proper completion of a U.S. private placement under
U.S. law.”
Goldman began notifying clients of
its decision on Sunday night in Asia, and clients in Europe and the U.S.
were being told on Monday, according to people familiar with the
situation. In its statement, Goldman said the decision to limit the
offering to “offshore” investors wasn’t “required or requested by any
other party,” including the Securities and Exchange Commission. A
Facebook spokesman said that Goldman “is in the best position to answer
any questions.”
… Private placements like the
Facebook deal are subject to strict SEC guidelines, and Goldman’s
statement Monday suggests that executives grew concerned that huge
interest in the offering could expose the securities firm to regulatory
vulnerability. One Goldman client was told the deal is being offered
only to non-U.S. clients because of regulatory concerns.
A total of about $7 billion in orders
for Facebook shares has poured in, according to a person familiar with
the matter. That means it is highly likely that Goldman still can pull
off the offering at its original size without U.S. investors. Chinese
demand is especially strong, said one person familiar with the offering.
That is a damn shame, but also a testament to the marketing prowess
of Goldman’s brokers and bankers. Anyone who had the opportunity to
review the subscription only research ( FB note final) that
I released on Facebook valuations should be flabbergasted in hearing
that GS can raise $7 billion for a $1.5 billion offereing giving the
simply ludicrous pricing.
“They’re still committed to doing the
deal at the original size,” one Goldman client said. But U.S. investors
are “going to be disappointed,” this person added.
Trust me, either the fallout from my articles, Goldman’s fear that
the SEC might actually do their job, or some other diving force of
mystical origin has actually done some lucky investor soul a big favor.
In its statement to The Wall Street
Journal, Goldman said it “regrets the consequences of this decision, but
we believe this is the most prudent path to take.” Goldman clients are
being told to pony up their money for Facebook shares by the end of this
week, said another person familiar with details of the private
offering.
Of course, it’s still not too late to hit some foreigners for their
money at fantasy level valuations, along with the “I might stab you in
the back” clauses attached. Goldman Sachs disclosed that it might sell or hedge its own $375m investment without warning clients. Under the deal, private
wealth-management clients would be subject to “significant
restrictions” limiting their ability to sell stakes while Goldman Sachs
own holding can be sold or hedged at any time, and without warning. Go figure why anyone would clamor to get into a deal such as this. As excerpted from “Facebook
Registers The WHOLE WORLD! Or At Least They Would Have To In Order To
Justify Goldman’s Pricing: Here’s What $2 Billion Or So Worth Of
Goldman HNW Clients Probably Wish They Read This Time Last Week!“
To put the amount of optimism used in our analysis in perspective, there are 6,892,839,222 people in the world according to the US Census Bureau’s World Clock.
Facebook currently claims 9% of that world population. Take into
consideration a material percentage of that population are elderly or
very young, infirm, illiterate, poverty stricken or located in remote
rural areas and do not have iPhones and Androids, broadband connected
computers and Facebook accounts, and may not have these things for some
time, if ever. For the extremely optimistic benefit of the doubt, let’s
assume that all children down to the age of infancy, the infirm, the
illiterate and the Australian outback settlers all are frequent or
likely Facebook users. Even with this assumption, Facebook will have to
hit 65% of today’s total (as in the ENTIRE) world population (not
factoring in population growth/shrinkage) by c.2020 to justify anything
approaching a $50B valuation – and that’s assuming they captured 65% of
every single man, woman and child in the world along the way – not 65%
of those who have access to an internet connected computer.
Any of those foreign clients considering an investment should reach out to me.
I am quite curious to hear what Goldman said to entice you to bite. In
exchange, I’ll forward you a copy of our proprietary valuation and you
can compare my notes to that of your Goldman salesperson.
More Reggie Middleton on Goldman and Facebook:
If you haven’t read my first four pieces on this topic, please do so
for you will easily be able to glean my overarching opinion on this
most recent Facebook “investment”:
- Facebook Becomes One Of The Most Highly Valued Media Companies In The World Thanks To Goldman, & Its Still Private!
- Here’s
A Look At What The Goldman FaceBook Fund Will Look Like As It Ignores
The SEC & Peddles Private Shares To The Public Without Full
Disclosure - The
Anatomy Of The Record Bonus Pool As The Foregone Conclusion: We Plug
The Numbers From Goldman’s Facebook Fund Marketing Brochure Into Our
Models - Facebook
Registers The WHOLE WORLD! Or At Least They Would Have To In Order To
Justify Goldman’s Pricing: Here’s What $2 Billion Or So Worth Of
Goldman HNW Clients Probably Wish They Read This Time Last Week!
Higher level subscribers
should review the detailed and illustrative valuation exercise to the
professional/institutional (read as, HNW) blog subscribers: FB note final.
- advertisements -
It's a WEBSITE. www.facebook.com. That's it! Nothing more. It cannot be worth $50,000,000. I doubt it's worth $50,000,000 once they pull back the curtains and see that it doesn't have a profits!
A magic invention will emerge in the near future with a really cool feature. It will be another website that protects your privacy and doesn't have a million annoying ads streaming at you. This site will have a button marked 'Import My Facebook Friends?' ****POOOFFFF*** No more Facebook!
Btw, Hotmail.com has something like 350,000,000 users and they obviously spend a lot of time checking their email. What's that valued at?
Facebook raises $1.5 bln in Goldman deal, will disclose financials by April 2012
should be flabbergasted in hearing that GS can raise $7 billion for a $1.5 billion offereing giving the simply ludicrous pricing.
If the government can do it, why not GS? Government bond offerings are constantly oversubscribed.
it’s still not too late to hit some foreigners for their money at fantasy level valuations, along with the “I might stab you in the back” clauses attached.
Yep, that sounds like the government to me, though ultimately they stab themselves in the back a.k.a. Zimbabwe.
Personally, I would have loved to see Goldman's "favored clients" pour money into this insane scam.
But a lot of them were probably perfectly willing to lose the money, simply for the NYC cocktail-party cachet of saying to some NYU libarts-major chick, "Check it out, I got a piece of the Facebook offering ... and my schwanz is, like totally huge, too. In fact, Lloyd Blankfein and GS private equity recently valued my schwanz at 9 inches, and say there is huge Chinese investor interest in my schwanz. So you'd better grab a piece before I pull the offering, if ya know what I mean."
the thought that the SEC got serious....about Goldman? .... is simply ludicrous....
more than likely, the fucking ahead was so obvious to the clientele that they had to pull back.....
Seems liked the wired world is slowly making headway against these corrupt parasites.
Reggie and another analyst or two, in a week or two, disect this and can reach the world exposing the crap this whole deal was, from both a politica/legal point of view and financial point of view. Everyday, we see a little more of the man behind the curtain. Doesn't happen as quickly as it should, but despite all money, media and political manipulation, Goldman is losing its reputation and its teflon armor.
Thanks Reggie great stuff once again.
The thing I find interesting in the valuation of Facebook is the assumption they will always be the standard from here on out, that no one can now compete with them. I know that standards matter and can be amazingly sticky, like Windows, MS Office...but there has to be some chance, 5 percent, 20 percent, IDK, that someone new can take out Facebook status as main place to connect with friends and family. Standards matter, but I can see someone coming up with something that makes it real easy to migrate your FB account to a new network is more private, has better features, such a shift could happen in weeks if competitor was ready for traffic and people were fed up enough with FB...just push a button and voila...not like converting software on 50-1000's of machines at your business...and really how hard is it to learn how to post to a social networking site, shoot FB keeps changing, even old people will adjust if everyone in a new group.
I'm not saying it would be easy or it is very likely, but some form of competition we can't even forsee right now could easily roll FB users in less than a year if conditions right.
A stepdaughter was interested in Facebook for awhile but after the initial flurry of activity, lasting about a year, she is trying to restrict it or figure out how to get off.
It probably depends what else people have for recreation.
excellent expose Reggie. I presume the young and "make the world a better place" CEO Zuckerberg has approved this overvaluation scam. Perhaps he along with the Goldman gods could sell an IPO to help the millions of starving people on the planet-oh yeah, GREED knows no conscience!
Of course, Goldman knows a little bit about millions of starving people in the world. I saved this link from a ZH post a while back. Johann Hari is a columnist for the London Independent.
http://johannhari.com/2010/07/02/how-goldman-sachs-gambling-on-starving-...
good link! The new CFTC rules appear too lax to stop food commodity speculation. Is Greed's appetite greater than millions of starving people?!
I don’t have a Facebook account and I truthfully don’t feel like I’m missing anything. My wife has one and I do find it entertaining when she tries to explain to me why it’s valuable in her life; then she usually gets mad at me. She did say the other day that when she finds the time she has a lot of people that she needs to un-friend, whatever the hell that means.
...ditto here...and then I get these requests from people reading my wife's page...looks like a massive time sinkhole to me with the added liability of identity theft thrown in.
That is FaceSpeak for permanent junking ;-)
Yes reggie you impacted this. The scams are being set up like dominoes right now right here and people are outing them nearly as fast as they get set up.
From the Wall Street Journal: Goldman to Exclude U.S. Clients From Facebook Deal:
"A total of about $7 billion in orders for Facebook shares has poured in,"
The US side is now owned in a Cayman Corp. created yesterday, last week, whatever... with 0% FED funds borrowed at??? whats leverage? 4%?
"I released on Facebook valuations should be flabbergasted in hearing that GS can raise $7 billion for a $1.5 billion offereing giving the simply ludicrous pricing."
Reggie you and Tyler need a Love child... well, you know what I mean.
God Bless You and Yours as always Reggie.
Dis-Closure Bitchez!!!!!!!!!!!!!!
"Goldman Sachs disclosed that it might sell or hedge its own $375m investment without warning clients. Under the deal, private wealth-management clients would be subject to “significant restrictions” limiting their ability to sell stakes while Goldman Sachs own holding can be sold or hedged at any time, and without warning."
Yes! Tyler crushed Goldman for how many 100's of million? a billion + lifetime (US) revenue stream...
Of course Reggie your all knowing stache'... as always helps!
Maybe they want to launch it and short it themselves?
Why would Goldman over capitalize any company just to short it? thats poppy cock!
ANYBODY WITH A FARCEBOOK ACCOUNT SHOULD CLOSE IT DOWN!!!
Too late. They already got your face.
Goldman = LAW
Goldman = $
Goldman = White house
Goldman = Consitution
Goldman = GOD!
Goldman is not god. St Vincent is sent from god to battle the 46 demons and their diabolical leader, the great midget demon GG from that fortress of evil, golden sachs. You see in five hundred years mispellings are bound to occur in new translations of the epic.
They need to Reggie Proof their models;-)
It is not just the bombastic valuation, the risk created by a defective private placement is very significant since one remedy for an illegal public offering is investor rescission rights, i.e. A 100% return of capital.
Two law firms are in a room pissing on each other over who is responsible for creating this situation. The answer is the whole room full of clowns.
The practical side of me finds it hard to imagine that GS legal didn't vet this for technicalaties (as in find some legal loophole) before it was announced. Regardless, if I am not mistaken (and I'm not a lawyer), the SEC rules are loose enough to disallow it based upon it being in the spirit of a public offering, which is precisely what it was.
Now you've done it! The SEC is clearly exposed as puppet bedmates of financial players.
SEC was established to block opposition to WallStreets clever-stroke scheme, thus enabling fraud under the myth of regulation.
1. SEC run by 5 Commissioners effectively chosen by [advice + consent of] the Senate, which itself was set-up to be the oligarchy's trump over law [and only elected by popular-vote since 1913, 17th Amend.]
2.The President cannot fire a Commissioner.
3.SEC has no Criminal authority; no criminal enforcement. Only Civil wrist-slaps [no jail/prison prosecution]. SEC "may" only "refer" a matter to non-SEC Criminal Enforcement Agencies.
4. In 1988, long before gutting of Glass-Steagall, ExecOrder12631 established Preident's Working Group on Financial Markets "to enhance the integrity, efficiency, orderliness and competitiveness of the financial markets while maintaining investor confidence"...
Sec. of Treas., Chairman
Chairman of SEC
Chairman of FedReserve
Chairman of CFTC
...All around us, we see the results of their work. They are competent fraudsters.
5. SEC "monitors" Muni securities trading thru MSRB, which has no enforcement authority.
6. SEC specializes in "self-regulation" by depending on Self-regulating Organizations, industry groups set-up to monitor themselves.
7. SEC works with State law/regulation, except for nationally traded securities, where it trumps State law/reg, thereby blocking State AG eyes and enforcement. Works well as designed by and for the crims.
Only Congress, both houses together, can make the SEC extinct...but the Senate looms large as the bought and leashed 800-lb gatekeeper of privilege.
I know something of the law ;-) I also know something of risk committees. They were too anxious to get the deal and someone somewhere convinced everyone that they could manage the process.
Private placement rules are actually pretty straight forward, but they opted for a grey path straight from the gate. The SPV and the delusion that this would not leak were two very substantial chinks in the deal armor.
Once the lid is blown all you can do is wait six months or go to non US Persons.
double secret probation.
HE ITERN!! YOUR IN CHARGE OF THIS FACEBOOK IPO!!
AND AFTER THAT, BRING ME MY COFFEE!!
It's not fair to blame it on Chris Dodd and Larry Summers ;-)
Count de Monet:
"Oh, Piss Boy ! Piss Boy !"
"Oui ? Oui ?"
"... ...Wait for the shake. Now there, there's for you. [ Tosses a Sou into the bucket ]. Piss off."