Goldman Sachs said it will limit its private placement of shares of social networking site Facebook to investors outside the United States, citing “intense media coverage.”
Goldman expects to raise $1.5 billion for Facebook, but the chance to buy a slice of Facebook ahead of any future public listing attracted widespread commentary and news coverage, which potentially could bring it under regulatory scrutiny.
“In light of this intense media coverage, Goldman Sachs has decided to proceed only with the offer to investors outside the US,” the company said in a statement provided to Reuters.
In light of this intense media coverage, Goldman Sachs has decided to proceed only with the offer to investors outside the US
Goldman began notifying clients of its decision on Sunday.
“We regret the consequences of this decision, but Goldman Sachs believes this is the most prudent path to take,” the investment bank said.
Goldman said the decision not to conduct a private placement of the shares of Facebook, a closely held company, in the United States was solely its own and was not required or requested by any other party.
That would include the US Securities and Exchange Commission, which is scrutinising secondary market trading in Facebook shares.
“Once this event received widespread publicity, it conceivably could be argued that Goldman was benefiting from a general solicitation, via news reports of its efforts on behalf of Facebook,” former SEC Chairman Harvey Pitt said.
“My impression is that Goldman is using that as an excuse to save face, given the SEC investigation that has been publicised in the press, as a result of this proposed transaction,” said Pitt, who is chief executive of consulting firm Kalorama Partners.
While general solicitation and advertising is still prohibited overseas, if the publicity has not been as widespread in other countries, the issuer and the underwriter could get comfortable proceeding with the offering, said an industry attorney who has advised companies with similar issues.
Facebook already has received a $450 million investment from Goldman Sachs and $50 million from Russian investment firm Digital Sky Technologies, in a deal that valued the company at $50 billion.
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