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Guest Post: Is Goldman Sachs A Vampire Squid On Facebook’s Face?
Submitted by Wall St. Cheat Sheet
Is Goldman Sachs a Vampire Squid on Facebook’s Face?
There’s confidence, then there’s bravado.
Goldman Sachs (NYSE:GS)
is acting more insecure than ever with an incredibly pompous payment
structure for private placement shares of social networking site Facebook. According to Bloomberg Markets Magazine (via Business Insider), the investment banking deal doesn’t have only placement agent fees, it also includes a Vampire Squid Clause:
The firm would levy a 4% placement fee on clients, plus a .5% “expense reserve” fee. It would also require investors to surrender 5% of any profits, known as “carried interest,” according to a Goldman Sachs document.
This is Everything Wrong with Wall Street Today
We can debate whether Wall Street owes society a fiduciary duty. But the Vampire Squid Clause is an affront to the efficiencies and benefits of capitalism.
As my boss told me on my first day as an investment banker, “Don’t
get a big head. You’re nothing more than a glamorized used-car
salesman.” In other words, all I did was repackage and sell interests in
used businesses. Goldman is doing just that when they connect
prospective investors with Facebook. Nothing more, nothing less.
Is making a connection worth a carried interest in future returns?
ABSOLUTELY NOT. This isn’t Goldman’s hedge funds or trading desks where
Goldman is actually creating value in the underlying businesses or
generating trading profits. Investment banking is an agency service.
Goldman is nothing more than a broker for its clients and Facebook.
If investors and companies are willing to give a middle-man a
percentage of upside returns (of course Goldman carries no risk — the
clients hold all that), we are agreeing that a percentage of
the value created by the hard working employees of the company and the
risk-taking investors should be skimmed away from the capital’s best
use. For capitalism to thrive, risk-takers must be fully rewarded for
taking risks, and businesses must be fully rewarded for adding value to
society. An agent, of course, is entitled to a flat fee.
Facebook Employees and Investors Should be Livid
Kudos to billionaire Jim Clark for exposing this
thievery. Additional kudos for finding another company willing to broker
the deal for a cheaper and fairer price. Every other prospective
investor should step up and do the same.
Additionally, employees of Facebook should be pissed. They are most
likely working ~100 hours a week and dedicating their lives to the
company. That makes the Vampire Squid Clause even more insulting —
especially when you consider Goldman’s investor network is reached with
nothing more than phone calls, emails, and private placement memos full
of cut-and-pastes by some first or second year ibankers working for what
amounts to less than minimum wage per hour.
Rip Off the Vampire Squid
So, Facebook employees, investors, and prospective investors: rip it off! Rip off that Vampire Squid so capital markets and capitalism can continue breathing.
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facebook is so 2008
the zuckerberg kid is smart, no doubt...but in the world of finance, he is going to be taken to the cleaners and dipped in the chemicals in the backroom if he sticks with the squid.
the squid saw that baby comin'......and has been rubbing its tentacles into a frenzy in anticipation.
Squiduciary
Is Goldman Sachs A Vampire Squid On Facebook’s Face?I'm so hed-f'ked with the imagery I'm too dizzy to read the article!!
Lol ... that seems naive. The only reason Zuckerberg was funded in the first place is that his family is on the inside of the mafia.
There is a "squid-pro-quo".
Goldman is only able to make the deal and get Zuckerberg to sellout his employees, the new investors and his ficuciary duty because Zuckerman is being well taken care of.
The new bagholders (err investors) maybe not so much.
They can use facebook to cause riots and SHORT THE ENTIRE COUNTRY WHILE THEY ARE AT IT!!!
CAPITALISME RULES BABY!!!!
I'm just kidding, they would never do that.
to many moral thingies and all preventing them to do so...
Scouts honor...
Pinky swear...
Cross that hard and hope to...
GS and the new dot.bomb 2.0...they did a great job last time around keeping everyone in fiscal shape...oh wait...I just made myself sad a little...
SD
Nice....pinky swear
Answer - yes, it is.
DavidC
Please rip it off so Facebook can continue creating value by providing an outlet for narcissism, egotism, and selling your personal data to 3rd parties so they can effectively target the peons so that they buy more trinkets made in China (or wherever manufacturing is moving these days, Laos?). If Facebook didn't provide this market niche, who else would?
Capitalism doesn't exist, the free market does not exist ... fuse together oligarchy, corporatism, military-industrial complex, cronyism, and security theater and you get a much better explanation of our system. Is there a neat and tidy word for that?
If the system we operate under is capitalism, I can't wait until it stops breathing.
Well said AR. Very well said indeed.
ORI
How could millions of people live without Farmville?
They might actually have to go out in the backyard and plant a garden, no?
I had an awesome idea ...
Create a program that would destroy peoples virtual farms with random virtual natural disasters (a chupacabra has eaten all of your cows) and then simultaneously create a "virtual insurance agency" where people would have to pay real money to protect their virtual assets.
It's called taxes and the insurance sold is called bank deposit insurance.
Can't be more virtual, online and pretend than the MMORPG called banking
Honestly, I'm a little aroused after reading that...
Aha! That will be a battle. Because Suckerbig is not alone. He has big investors like Microcrap, who know how to play the Wall Street Game.
But overall, the squid is going to overreach soon, with the wrong people. Everyone knows the Mafia is their partner in most of Wall street crime. I hear there was a big take-down/shake-down in the Mafia in NY/NJ yesterday.
i wouldn't be surprised if the Squid is sweating that, more than a little spotlight on it's business as usual of raping it's marks.
Because someone sure has the dirt on them, big time.
ORI
http://aadivaahan.wordpress.com/2010/11/12/wisdom-for-warriors-3/
Who ever deals with the squid deserves exactly what they get………..
ha ha watch them squirt ink all over the facebook's financials and run (away with the money, of course).
must read
http://www.shanghaidaily.com/article/?id=462524&type=
ho settles dispute with family
Is Facebook worth $1 trillion?
LMFAO. 1999 called and wants you to quit embarassing it by what are ridiculous valuations even by dot.com bubble standards.
Remember the face-hugger in Alien?
Facebook looked right into the egg and now has the face-hugger attached with a feeding tube down its throat. Any attempt to cut the foul thing off will result in acid burn.
dot com bubble redux
Scarcely a week goes by without discovering a new target encircled by a Goldman tenacle. Let’s travel all the way across the sea to Davos and as an insider you’ll be listening to one of the voices of the squid—Robert Rubin. Here, spend frightening moments listening to this voice:
Global Insiders Warned: U.S. Debt Crisis Could Explode Anytime | Economic Policy Journal | Robert Wenzel | January 25, 2011
…When attendees arrive and check in, they will be given their badges and a copy of a special Davos magazine, prepared especially for the event. In the magazine will be an article by Robert Rubin. He is an insider's insider. Participants will read the article. Rubin is so wired in that when insiders think of the people who are operating behind a president, it is names like Rubin's that come to mind. Jacob Lew the new director of the Office of Management and Budget is connected to Rubin. The old director of OMB, Peter Orszag, was connected to Rubin. The new head of the National Economic Council, Gene Sperling, is connected to Rubin, as was the previous NEC head, Larry Summers. It goes on. Rubin served as Treasury Secretary under Bill Clinton. He was former co-CEO of Goldman Sachs. He is co-Chairman of the Council on Foreign Relations. Got the idea? Insiders will read what he has written.
The first part of the article is about what the United States needs to do to get the economy going. It is a desperate shot taken at the buzzer from beyond half court. Rubin knows this...
The second part of the article is much more significant. It is the breakdown of what is going wrong in the United States. An abbreviated version of the "Davos Warning" has been printed in FT.
Rubin wrote (my emphasis):
What multiple shapes could the crisis take? Rubin writes to the Davos insiders (My emphasis):
For emphasis, I remind you this is a former Treasury Secretary of the United States writing. One of President Obama's top outside advisers. So does Rubin think there is an easy solution to the debt problem? He writes:
There you have it, from a man as inside as you can get:
Bottom line: The United States is in serious financial and economic trouble. It is only a matter of time before the crisis explodes. Don't take my word for it, just re-read what the former Treasury Secretary has to say. It's all there.
http://www.economicpolicyjournal.com/2011/01/global-insiders-warned-us-debt-crisis.html
P.S. The Goldman-Robert Rubin-funded Hamilton Project embedded in the Brookings Institution and in the Obama government is essentially pushing for cuts in entitlements (like social security), for outsourcing American jobs, and for more NAFTA-type agreements -- J.R.
I feel very badly for the whole circus act...Squids, Faceshnooks and sophisticated morons. Where is my clown in the sewer file...
Yeah but what's crazier... The fact that Goldman charges it, or that there's people that will pay it? Goldman gets 4% of the billion the 'sold' plus 5% of any future earnings... Yet facebook selected them to do the placement and apparently plenty of investors were happy paying the fee.
It is like this. Facebook isn't worth $50 billion and Zuckerberg isn't worth $7 billion like they claim.
Not yet anyway. This has been the biggest pump set up in history. They get Sorkin to write the Social Network movie. All of 2010 has been pumping up Zuckerberg and Facebook. They grease some palms to get MZ named Time Person of the Year.
2011 is when the fleece is suppose to happen. You can't get a better build up. Boiler Room type stuff.
The difference is Goldman puts sawdust in the transmission and says it was only driven to Sunday School by Granny once a week.
Ah, the poetic justice of it all.
It's absolutely A-OK, AAA across by all services A-1+, P-1 to share with one another that they're just a bunch of used car salesmen (making millions, which was where the ha-ha but we never talk about it came in) but when the public knowingly holds them in such distain therefore, it's an embarrassment, a slight to one's dignity, a manifest erosion of one's fundamental, most basic self-esteem.
He who dies with the most toys is still a twat.
http://www.wharton.universia.net/index.cfm?fa=viewArticle&id=2002&langua...
It would be nice for the taxcows if the underwriter had to post a 10 per cent bond to deal with the lawsuits that will clog the taxcow funded court system.