Body blow for Facebook as Goldman Sachs cancels US placement

18 Jan 2011

The media frenzy surrounding Facebook’s recent raising of US$450m from Goldman Sachs which valued it at US$50bn has forced Goldman Sachs to cancel its private placement for American clients.

Goldman Sachs had intended to raise US$1.5bn through a private placement of Facebook shares. US investors had the option of investing US$2m but could not sell their shares until 2013.

Both Facebook and the investment bank intended to move an excess of 500 US shareholders and either go public or publish accounts.

US law prohibits investment firms from advertising or promoting private share placements.

Media frenzy

However, it seems the intensity of media coverage has caused Goldman Sachs to shy away from the US placement because it fears it could be accused of having promoted the placement.

“Goldman Sachs concluded that the level of media attention might not be consistent with the proper completion of a US private placement under US law,” the bank was quoted in The Guardian as saying.

It said the decision was its own and it was not requested or required to make the decision by any other party.

It is understood that the placement would have been over-subscribed, with US$7bn offered by investors, well beyond the initial US$1.5bn envisaged.

This is being driven by Facebook’s continued growth as a hot social-networking property and the fact it is now approaching 600m users worldwide.

Goldman will still be able to raise private placement funding for Facebook outside the US.

This latest turn of events may force Facebook’s hand and see it pursue an IPO earlier than 2012.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years