Goldman helps Facebook, and vice versa
What’s good for Facebook now will be good for Goldman, Sachs & Co.
News of the investment bank’s decision to invest $450 million in the social-networking giant helped send Goldman’s shares up $4.89, or 2.9%, to $173.05 on Monday, amid a broad market rally.
That left the stock at its highest level since April 15. What’s significant about that: The shares now have recouped nearly all of what they lost in the aftermath of the Securities and Exchange Commission's civil fraud case against the bank.
Goldman’s shares plummeted $23.57, or nearly 13%, to $160.70 on April 16 after the SEC stunned Wall Street by alleging that Goldman in 2007 defrauded investors in marketing what became toxic mortgage securities. The stock continued to slide through the spring and early summer before finally bottoming at $131.08 on July 2.
The shares pushed higher from there, but stalled out in mid-December despite the broader market’s continuing advance.
Goldman on July 15 agreed to settle the SEC case by paying $550 million. As usual with such cases, the bank wasn’t required to admit wrongdoing.
Goldman’s investment in Facebook obviously puts the bank in prime position to lead an initial public stock offering of the firm when that day comes.
But Reuters’ Felix Salmon questions whether Goldman’s stake, and its plan to create a “special purpose vehicle” to allow its well-heeled clients to invest in Facebook, pushes the timetable for an IPO farther into the future rather than bringing it forward.
Facebook clearly has no need for capital (a prime motivator for IPOs), has plenty of liquidity options for existing shareholders and still could avoid many public company hassles outside of the financial filings (no need to meet with analysts or hedge funds, do quarterly earnings calls, etc). In fact, one even could argue this deal makes an IPO less imminent.
Mark Zuckerberg clearly has no desire to run a public company, and he might be tickled by the idea that shares in Facebook, like his personal information on Facebook, are available only to a certain group of friends. The SEC can force him to disclose certain corporate information. But it can’t force him to go public.
Howard Lindzon of StockTwits has another perspective on the Goldman-Facebook hook-up: “This is not a coup for Goldman Sachs, this is a shame for the social web.”
-- Tom Petruno
Photo: Facebook CEO Mark Zuckerberg. Credit: Gabriel Bouys / AFP Getty Images