6 ms·

Facebook will be forced to go public after their deal with Goldman Sachs

87 points by dglassan 16y ago

ecuzzillo 16y ago
'Move fast and break things' apparently applies to finance as well as programming.
scrollbar 16y ago
If you think that Goldman hasn't done their homework, and consulted with their very close buddies at the SEC, then you're crazy. These guys have proven over the past several years in particular that they are the gods of finance, and if there are rules and regulations in their way, they will either find a path around them or convince government officials to craft a new hole instead.
- MichaelApproved 16y ago
  Didn't they just recently get busted by the SEC and were not able to find a path around the rules and fines?
  - mebassett 16y ago
    perhaps they did. but perhaps you should provide some more information about the event you refer to. This perhaps? http://www.bloomberg.com/news/2010-12-10/goldman-executive-fabrice-tourre-files-motion-to-dismiss-amended-sec-suit.html http://www.bloomberg.com/news/2010-12-10/goldman-executive-f...
    - brown9-2 16y ago
      MichaelApproved is referring to this http://www.bloomberg.com/news/2010-07-20/goldman-sachs-settlement-with-sec-for-550-million-approved-by-u-s-judge.html http://www.bloomberg.com/news/2010-07-20/goldman-sachs-settl... The U.S. Securities and Exchange Commission won court approval to levy a $550 million penalty against Goldman Sachs Group Inc., the largest ever against a Wall Street firm, over claims the bank misled investors in collateralized debt obligations linked to subprime mortgages.
      - MichaelApproved 16y ago
        Thanks for the reference. I was on my phone, thought it was known well enough and so I didn't give more details. Will try to give more details next time.
  - lefstathiou 16y ago
    $550 million sounds like a big number but it represents less than 6 days of trading profits to Goldman. It was a drop in the proverbial bucket. http://seekingalpha.com/article/135785-goldman-sachs-why-aren-t-trading-profits-raising-any-red-flags http://seekingalpha.com/article/135785-goldman-sachs-why-are...
    - yummyfajitas 16y ago
      Reporting it as a fraction of trading profits is a confusing thing to report. After all, Goldman has lots of non-trading costs: buildings, salaries, software licenses, vendor payments, etc. It was actually 15.5 days of profits for Goldman, plus the $90 million Goldman lost on the deal itself. (Goldman wasn't just a perpetrator, they were also one of the victims. If you believe the SEC, Goldman helped Paulson to defraud themselves as well as others.)
      - phlux 16y ago
        >If you believe the SEC, Goldman helped Paulson to defraud themselves as well as others. CYA
- swombat 16y ago
  While I don't believe GS is immune to errors, I don't think it's that unlikely that they might have foreseen this. It's such an ugly hack that they couldn't have expected it to go unnoticed, especially since it seems to me they (directly or indirectly) were the ones to tell the press about it. It feels like the Media/SEC reaction is, so far, playing by the book, utterly predictable. So the real question is, did they let Facebook know this was going to happen? If yes, then perhaps this is a media coup to frienzy up interest into the soon-to-come IPO. Perhaps they'll cancel the whole deal now, but the $50b valuation will remain in people's heads as a "good deal" that "high net worth individuals" were willing to invest at. This might help drive a traditional IPO price upwards. If no, then perhaps this is GS's attempt to force Facebook to IPO, so they can make a few billions along the way. It's always nice to have a billion or two extra on the balance sheet, even when you're GS. Then again, it's not good business practice to screw over your clients, and somehow I don't think that's what happened. In either case, I think the SEC should look long and hard at its rule book and see if there is any way it can bar GS from being the senior lead in the IPO. Oh wait, the SEC is made of former GS employees. Nevermind.
anonymoushn 16y ago
The law does not apply to the Goldman Sachs. Facebook will not be forced to disclose anything.
- bluedanieru 16y ago
  I don't know why this is getting downvoted. It's not like cynicism with respect to the financial industry in America isn't a perfectly logical position to... oh right HN is about 80% libertarian troglodytes who don't have a single thought they didn't read in a book by Ayn Rand. Carry on.
  - redthrowaway 16y ago
    This comment really adds nothing to the discussion. I imagine if people were downvoting the parent comment, it is because they made an extraordinary claim (GS is immune to US law), without providing any evidence. We're downvoting you because you's trollin'.
    - bluedanieru 16y ago
      Not really trolling, at least not intentionally. The parent was glib, sure, but I see comments such as that all the time in more technical discussions on HN and they pass unremarked or even upvoted. Yet when it happens in a political discussion people lose their shit because we're all expected to be a bunch of little Montesquieus around here nowadays. Fine, GS is not literally immune to US law, but surely you can imagine how someone might think that, in certain respects, they may as well be or they appear to be. And there is nothing wrong with making a snarky comment to that effect when it is clearly not meant to be taken literally. I don't know if HN was always like this and we have more political links on here recently, or if it's a change in membership composition, but from what I can tell the range of allowed opinion in political discussion has greatly narrowed over the past six months or so compared to that in technical discussion. And that's too bad.
      - rglullis 16y ago
deleted 16y ago
[deleted]
BarkMore 16y ago
Facebook is aware of the rule in question. The Facebook restricted stock plan was designed so that the participants are not considered stock owners. I doubt that Facebook went ahead with this deal without carefully examining the issue.
- jonburs 16y ago
  FB asked for and received a waiver from the SEC for their restricted stock plan: http://www.businessweek.com/technology/content/nov2008/tc20081120_566312.htm http://www.businessweek.com/technology/content/nov2008/tc200... Basically since the restricted stock holders are employees that didn't directly invest money they're not being considered as counting against the 499 limit (which to me seems perfectly fair).
gojomo 16y ago
After reading this, I can believe GS & Facebook are hoping the 'Special Purpose Vehicle' lets Facebook get further liquidity while staying private, while remaining ready for the SEC to rule against them, forcing public reporting. At which point, they mock-begrudgingly reveal numbers better than anyone had expected, setting up a monster IPO as a consolation prize.
jaekwon 16y ago
Anybody think maybe Facebook got pwn'd by GS? As in, maybe Facebook's financials aren't that great and they wanted the GS money. GS offers a deal with the mock-promise that they'll deliver a special vehicle to get around the 500 IPO rule, when they really just want to flip FB shares to the public and pre-ipo traders for a short term profit.
- qq66 16y ago
  haha that would be classic GS. "Um sorry we were wrong about the IPO rule." However, there is no IPO rule -- the rule only requires public disclosure of financials, not public ownership.
motters 16y ago
Whatever Goldman Sachs motivations are, you can bet they're not good.
- getsat 16y ago
  They're good for Goldman Sachs.
  - lefstathiou 16y ago
    the purpose of business is to make money. Goldman should have no other priorities but it's shareholders.
    - 3pt14159 16y ago
      Absent force or fraud, yes. Not sure if Goldman always makes plays absent force or fraud though.
Mystalic 16y ago
This article misses a very important point: that Facebook wouldn't be required to start reporting its financial earnings until May 2012, 120 days after the last day of its current fiscal year. http://mashable.com/2011/01/03/facebook-ipo-may-2012/ http://mashable.com/2011/01/03/facebook-ipo-may-2012/ This week's move essentially buys Facebook 16 months of time until it has to IPO. So yes, Facebook will essentially have to go public, but it won't be for a while. Goldman and Facebook knew exactly what they were doing.
tocomment 16y ago
Is there any reason not to buy into the IPO with a lot of money? I'm thinking, how can it not go up with all the hype that will surround it.
krschultz 16y ago
They may be forced to disclose financials, but they can't be forced to do an IPO. Those are two different (but often interchangeable) things. I'm not sure if the restrictions on executives of public companies apply to all that must disclose their financials, or only companies being traded on the exchanges.
- metageek 16y ago
  From the article: >A reminder: If Facebook is forced to register, it will not HAVE to offer stock to the public. But since it will be forced to disclose its financials anyway, we expect the company will go ahead and offer up some second class (non-voting) shares.
jfoutz 16y ago
I enjoy boring reporting with a touch of analysis. the whole "But wait, there's more" and "most exciting financial news EVAR" sucks.

87 points by dglassan 16y ago

'Move fast and break things' apparently applies to finance as well as programming.

If you think that Goldman hasn't done their homework, and consulted with their very close buddies at the SEC, then you're crazy. These guys have proven over the past several years in particular that they are the gods of finance, and if there are rules and regulations in their way, they will either find a path around them or convince government officials to craft a new hole instead.

MichaelApproved 16y ago
Didn't they just recently get busted by the SEC and were not able to find a path around the rules and fines?
- mebassett 16y ago
  perhaps they did. but perhaps you should provide some more information about the event you refer to. This perhaps? http://www.bloomberg.com/news/2010-12-10/goldman-executive-fabrice-tourre-files-motion-to-dismiss-amended-sec-suit.html http://www.bloomberg.com/news/2010-12-10/goldman-executive-f...
  - brown9-2 16y ago
    MichaelApproved is referring to this http://www.bloomberg.com/news/2010-07-20/goldman-sachs-settlement-with-sec-for-550-million-approved-by-u-s-judge.html http://www.bloomberg.com/news/2010-07-20/goldman-sachs-settl... The U.S. Securities and Exchange Commission won court approval to levy a $550 million penalty against Goldman Sachs Group Inc., the largest ever against a Wall Street firm, over claims the bank misled investors in collateralized debt obligations linked to subprime mortgages.
    - MichaelApproved 16y ago
      Thanks for the reference. I was on my phone, thought it was known well enough and so I didn't give more details. Will try to give more details next time.
- lefstathiou 16y ago
  $550 million sounds like a big number but it represents less than 6 days of trading profits to Goldman. It was a drop in the proverbial bucket. http://seekingalpha.com/article/135785-goldman-sachs-why-aren-t-trading-profits-raising-any-red-flags http://seekingalpha.com/article/135785-goldman-sachs-why-are...
  - yummyfajitas 16y ago
    Reporting it as a fraction of trading profits is a confusing thing to report. After all, Goldman has lots of non-trading costs: buildings, salaries, software licenses, vendor payments, etc. It was actually 15.5 days of profits for Goldman, plus the $90 million Goldman lost on the deal itself. (Goldman wasn't just a perpetrator, they were also one of the victims. If you believe the SEC, Goldman helped Paulson to defraud themselves as well as others.)
    - phlux 16y ago
      >If you believe the SEC, Goldman helped Paulson to defraud themselves as well as others. CYA
swombat 16y ago
While I don't believe GS is immune to errors, I don't think it's that unlikely that they might have foreseen this. It's such an ugly hack that they couldn't have expected it to go unnoticed, especially since it seems to me they (directly or indirectly) were the ones to tell the press about it. It feels like the Media/SEC reaction is, so far, playing by the book, utterly predictable. So the real question is, did they let Facebook know this was going to happen? If yes, then perhaps this is a media coup to frienzy up interest into the soon-to-come IPO. Perhaps they'll cancel the whole deal now, but the $50b valuation will remain in people's heads as a "good deal" that "high net worth individuals" were willing to invest at. This might help drive a traditional IPO price upwards. If no, then perhaps this is GS's attempt to force Facebook to IPO, so they can make a few billions along the way. It's always nice to have a billion or two extra on the balance sheet, even when you're GS. Then again, it's not good business practice to screw over your clients, and somehow I don't think that's what happened. In either case, I think the SEC should look long and hard at its rule book and see if there is any way it can bar GS from being the senior lead in the IPO. Oh wait, the SEC is made of former GS employees. Nevermind.

anonymoushn 16y ago

The law does not apply to the Goldman Sachs. Facebook will not be forced to disclose anything.

bluedanieru 16y ago
I don't know why this is getting downvoted. It's not like cynicism with respect to the financial industry in America isn't a perfectly logical position to... oh right HN is about 80% libertarian troglodytes who don't have a single thought they didn't read in a book by Ayn Rand. Carry on.
- redthrowaway 16y ago
  This comment really adds nothing to the discussion. I imagine if people were downvoting the parent comment, it is because they made an extraordinary claim (GS is immune to US law), without providing any evidence. We're downvoting you because you's trollin'.
  - bluedanieru 16y ago
    Not really trolling, at least not intentionally. The parent was glib, sure, but I see comments such as that all the time in more technical discussions on HN and they pass unremarked or even upvoted. Yet when it happens in a political discussion people lose their shit because we're all expected to be a bunch of little Montesquieus around here nowadays. Fine, GS is not literally immune to US law, but surely you can imagine how someone might think that, in certain respects, they may as well be or they appear to be. And there is nothing wrong with making a snarky comment to that effect when it is clearly not meant to be taken literally. I don't know if HN was always like this and we have more political links on here recently, or if it's a change in membership composition, but from what I can tell the range of allowed opinion in political discussion has greatly narrowed over the past six months or so compared to that in technical discussion. And that's too bad.
    - rglullis 16y ago

deleted 16y ago

[deleted]

BarkMore 16y ago

Facebook is aware of the rule in question. The Facebook restricted stock plan was designed so that the participants are not considered stock owners. I doubt that Facebook went ahead with this deal without carefully examining the issue.

jonburs 16y ago
FB asked for and received a waiver from the SEC for their restricted stock plan: http://www.businessweek.com/technology/content/nov2008/tc20081120_566312.htm http://www.businessweek.com/technology/content/nov2008/tc200... Basically since the restricted stock holders are employees that didn't directly invest money they're not being considered as counting against the 499 limit (which to me seems perfectly fair).

gojomo 16y ago

After reading this, I can believe GS & Facebook are hoping the 'Special Purpose Vehicle' lets Facebook get further liquidity while staying private, while remaining ready for the SEC to rule against them, forcing public reporting. At which point, they mock-begrudgingly reveal numbers better than anyone had expected, setting up a monster IPO as a consolation prize.

jaekwon 16y ago

Anybody think maybe Facebook got pwn'd by GS? As in, maybe Facebook's financials aren't that great and they wanted the GS money. GS offers a deal with the mock-promise that they'll deliver a special vehicle to get around the 500 IPO rule, when they really just want to flip FB shares to the public and pre-ipo traders for a short term profit.

qq66 16y ago
haha that would be classic GS. "Um sorry we were wrong about the IPO rule." However, there is no IPO rule -- the rule only requires public disclosure of financials, not public ownership.

motters 16y ago

Whatever Goldman Sachs motivations are, you can bet they're not good.

getsat 16y ago
They're good for Goldman Sachs.
- lefstathiou 16y ago
  the purpose of business is to make money. Goldman should have no other priorities but it's shareholders.
  - 3pt14159 16y ago
    Absent force or fraud, yes. Not sure if Goldman always makes plays absent force or fraud though.

Mystalic 16y ago

This article misses a very important point: that Facebook wouldn't be required to start reporting its financial earnings until May 2012, 120 days after the last day of its current fiscal year. http://mashable.com/2011/01/03/facebook-ipo-may-2012/ http://mashable.com/2011/01/03/facebook-ipo-may-2012/ This week's move essentially buys Facebook 16 months of time until it has to IPO. So yes, Facebook will essentially have to go public, but it won't be for a while. Goldman and Facebook knew exactly what they were doing.

tocomment 16y ago

Is there any reason not to buy into the IPO with a lot of money? I'm thinking, how can it not go up with all the hype that will surround it.

krschultz 16y ago

They may be forced to disclose financials, but they can't be forced to do an IPO. Those are two different (but often interchangeable) things. I'm not sure if the restrictions on executives of public companies apply to all that must disclose their financials, or only companies being traded on the exchanges.

metageek 16y ago
From the article: >A reminder: If Facebook is forced to register, it will not HAVE to offer stock to the public. But since it will be forced to disclose its financials anyway, we expect the company will go ahead and offer up some second class (non-voting) shares.

jfoutz 16y ago

I enjoy boring reporting with a touch of analysis. the whole "But wait, there's more" and "most exciting financial news EVAR" sucks.