Along with a $50 million investment from Digital Sky Technologies, the reputable/infamous (a matter of perspective) investment banking institution poured $450 million into Facebook, giving it a valuation of $50 billion. Private exchanges SecondMarket and SharesPost recently valued the social network at $52 billion and close to $60 billion, but this investment officially makes Facebook the third-biggest Internet company, ahead of Yahoo and eBay and trailing only Amazon and Google.
Goldman plans to develop a “special purpose vehicle” to pool investors interested in buying a piece of Facebook, thereby skirting the Security Exchange Commission’s 500-shareholder rule for private companies — to avoid disclosing financial info to the SEC (and the public), private companies can have no more than 500 shareholders. Facebook got an exemption to this rule in 2008 by arguing that its shareholders were primarily employees.
Last week The New York Times discovered that the SEC was investigating private exchanges, but the exchanges themselves didn’t seem to be the targets. Speculation was the SEC was examining investment outlets that were pooling multiple investors, thus beefing up valuations of emerging social media operations. While not explicitly illegal, such pooling certainly defeats the purpose of the 500-shareholder rule.
Business Insider is calling the Goldman investment Facebook’s “private IPO,” but it appears Goldman now has the wheel if and when Zuck and crew decide to go public. Of course, the investment firm has already let its clients in on the ground floor (or maybe the mezzanine, considering how much money has already been made off of Facebook on private exchanges).
Nobody from Goldman Sachs or Facebook felt like chatting about the investment.