Goldman Sachs, Facebook, the SEC and Bubble 2.0 Part II

In Part I we looked at why the Facebook not-IPO was the start of another round of Bubblenomics. Now its getting quite interesting as Goldman will no longer allow US investors to invest from the US (don't kid yourself that they can't invest though, anyone with $2m in change will probably have money stashed elsewhere, as Wikileaks is soon due to show), blaming unfair media practices.

“Goldman Sachs originally intended to conduct a private placement in the U.S. and offshore to investors interested in Facebook. The transaction generated intense media attention following the publication of an article on the evening of January 2, 2011, shortly after the launch of the transaction. In light of this intense media coverage, Goldman Sachs has decided to proceed only with the offer to investors outside the U.S.

Goldman Sachs concluded that the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law. The decision not to proceed in the U.S. was based on the sole judgment of Goldman Sachs and was not required or requested by any other party. We regret the consequences of this decision, but Goldman Sachs believes this is the most prudent path to take.”

The "media coverage" is a smokescreen - a decidedly dodgy deal by the Giant Squid of US Capitalism for the hottest latest Internet hypeful was always going to attract massive mass media attention, and the fact that they were proposing to dodge SEC regulations was always going to attract SEC interest. It's difficult to believe that they didn't see all that coming, so I don't either - I would hypothesize there is something else at work here.

Other reasons therefore for pulling the deal are not totally clear yet, lots of punditry going on of course, the main theories we spotted today are:

- given the rocketing of the stock on the shadow market, from a (probably deliberately) leaked report, they are potentially guilty of “general solicitation and advertising” in private offerings (Aka potentially Pumping....and given their own caveats of their own options, possibly Dumping - and shorting, hedging etc etc) and thus would attract a host of existing US laws that would stop the Private IPO

- that this is an attempt to get the Powers That Be to see that the SEC is a hindrance on USA Corp's freedom to do business, especially for Non-IPO funding, and put pressure on the SEC to back off so lots of other juicy private deals can be done (putting cheap public money expensively into private hands)

- that they can sell to overseas investors without disclosing the sort of information than they need to for US ones (or at least publically).

Personally I think the first two are too simple - the first in that, if it is true, means that Goldman (and Facebook's) hubris is at a zenith, and all their joint banking and PR horses and men couldn't see it coming / were not listened to, and the second because that kite is just too close to the wind to fly. The third, however, does interest me, given how coy both Facebook and Goldmans are being about Facebook's real financial position - the terms are almost South Sea Bubble-like:

For carrying-on an undertaking of great advantage but no-one to know what it [the exact financials - trusssst us] is!!"

Could it be that the reality is that the numbers for a $50bn valuation just don't add up and the last thing they want now is public discloure and bloggers and everyone picking over it.?

I can't help the feeling that another shoe is yet to drop on this.