Citing strong demand for Facebook shares, Goldman Sachs plans to stop soliciting investors
We just got a very accurate gauge of investor demand for Facebook.
It's officially off the charts.
Goldman Sachs has already received orders worth several billion dollars from its wealthy clients who want a stake in the privately held company and plans to stop soliciting interest from potential investors Thursday.
"It's a blowout," one Goldman employee told an investor who was considering buying Facebook shares for a client, according to the Wall Street Journal.
In less than seven years, Facebook multibillionaire founder Mark Zuckerberg has wired a twelfth of the world and changed the way people communicate. Now he's changing the way investors get a stake of the world's most popular social network.
And that has caught the interest of the Securities and Exchange Commission, which is taking a hard look at whether disclosure rules need to change now that investors are buying shares in privately held Internet companies without those companies being obligated to make disclosures to the public.
Current regulations require companies with 500 or more shareholders to publicly disclose certain financial information to give investors an idea of the risks they face when they buy a stock.
But Facebook struck a deal with Goldman Sachs to create an investment vehicle that allows its richest clients to buy equity in Facebook, potentially blurring the line between public and private companies, at least for an elite club of investors. Individual clients as well as some hedge funds and private equity firms that do business with Goldman were invited to plunk down at least $2 million apiece to participate.
Investors have to agree to leave the money in Facebook until 2013, even though they are getting skimpy information about the company's financial results and must pay high fees.
-- Jessica Guynn