Goldman Sachs Facebook package sets bank up to manage possible Initial Public Offering

A Goldman Sachs Facebook expenditure of $450 million was the biggest news on Wall Street Monday. Goldman Sachs was joined by a Russian business which invested an additional fifty million dollars, which boosted Facebook's implied industry value to $50 billion. As a new Facebook shareholder, Goldman has positioned itself to underwrite a predicted Facebook IPO that Wall Street has been eying greedily. Individuals are applying for paydayloans to be ready to jump on this bandwagon if it goes through.

Goldman Sachs creating its package with Facebook

The social network phenomenon will benefit a lot from Goldman Sachs investment. More industry worth than eBay, Yahoo and Time Warner will be put into it. Digital Sky Technologies, a Russian investment firm, added fifty million dollars to its stake in Facebook. In 2009 DST paid $200 million for a 2 percent stake in Facebook, and by buying shares from Facebook employees is reported to have increased its stake to about 10 percent. Facebook has no have to borrow cash even though it's a private company that won’t disclose finances. In 2010, Facebook reported owning a ton of money. About $2 billion was reported. Probably the most visited site within the United States last year was Facebook rather than Google too.

Goldman doing what it has to before Volker rule

With the Dodd-Frank financial reform bill, it seems like more people know the plan Goldman Sachs wants to take with the Facebook expenditure. The financial reform bill has a part in it that is called the “Volker rule.” The cash spent with Wall Street banks’ own money is limited when it comes to investments. Banks are given a few years to comply with new regulations with the financial reform legislation. The Goldman Sachs Facebook package indicates that the firm is taking advantage of that grace period to make lucrative private equity deals with its $900 billion balance sheet. Wealthy clients are being recruited to put up to $1.5 billion into Facebook by Goldman.

Goldman eyes sought after Facebook IPO

The Securities and Exchange Commission has been investigating Facebook because of possible private trading on the secondary sector of the company’s shares. The value of Facebook went up a ton this past year while the company tried to stop employees from selling the shares at a high price. There are rules on the number of shareholders allowed in private companies by the Securities and Exchange Commission. 499 shareholders are the maximum. With 500 shareholders, Facebook would have to make its finances public. Also, its shares would have to be registered. Facebook may have to go into an Initial Public Offering if the Goldman Sachs Facebook package goes through. Goldman would end up with huge fees and financial windfall for its clients if Goldman were to underwrite a Facebook IPO as Goldman owns so many shares.

Citations

New York Times

dealbook.nytimes.com/2011/01/03/why-facebook-is-such-an-important-friend-for-goldman-sachs/

Financial Times

ft.com/cms/s/0/e0dad322-173c-11e0-badd-00144feabdc0.html#axzz19zsuu6Oz

PC World

pcworld.com/businesscenter/article/215349/reports_facebook_raises_500_million_faces_sec_inquiry.html