Goldman Sachs is not giving its multimillionaire clients a lot of time or information before investing in a $1.5 billion Facebook private offering.
According to a customer who received a letter from Goldman, clients have only been given until the end of this week to decide whether they want a piece of the social networking giant.
The world’s largest investment bank this week agreed to invest $475 million into Facebook and initiated plans to raise as much as $1.5 billion through a special purpose investment vehicle marketed to its private wealth management customers. The private sales would value Facebook at $50 billion.
Holding the keys to one of the hottest investment opportunities around, Goldman has given ultra-wealthy clients little time to decide, and customers who received the Goldman email on Sunday were required to sign a non-disclosure agreement.
The private placement memorandum, which would contain detailed financial information about the company and terms of the investment, has not yet been circulated according to two clients, and the minimum investment is expected to be $2 million.
Both the minimum investment and the investment deadline may be subject to change, the investors said. Goldman declined to comment.
A follow-up letter from Goldman that most clients got on Monday contained very little information about Facebook, other than metrics about visitors that compare favourably to Google, which went public in 2004.
Goldman’s offering of Facebook shares, through an as-yet unnamed special vehicle, is being closely watched on Wall Street because it could set the stage for other private companies that want to raise money, but do not want the hassle and expense of publicly traded shares.
Another Goldman customer said he was surprised that the firm had still not sent out a private placement memorandum, concluding Goldman seems to expect customers to invest on “blind faith”.
The aggressive valuation attached to Facebook could give some savvy investors pause. A third Goldman client pitched on the deal said he believed Facebook has $2 billion in revenues, though the client did not know if the fast-growing company was cash flow positive or profitable.
The Goldman fund values Facebook at about 25 times revenue, an extremely rich valuation.
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