Facebook shares go like a hot potato.  Goldman Sachs decided to restrict a private share offer by Facebook from U.S. investors citing “intense media attention” that “might not be consistent with the proper completion of a U.S. private-placement under U.S. law” on Monday.  In a statement released to the Wall Street Journal, the controversial investment bank said it would limit the $1.5 billion private share offer to “offshore” investors as it feared that they could be stepping over the boundaries of U.S. regulation. According to the Financial Times, the potential violation could stem from the fact that as the number of Facebook shareholders exceeds 500, the company would be required to disclose detailed financial information, something it has managed to avoid. (See Facebook, Twitter, And The Shadow Stock Market).  “We regret the consequences of this decision, but Goldman Sachs believes this is the most prudent path to take,” read the statement, noting that “the decision not to proceed in the US was based on the sole judgment of Goldman Sachs and was not required or requested by any other party.”  Goldman Sachs had already invested $450 million in the up and coming social network, along with Russian internet investor DST and wealthy private clients. In what seemed like Wall Street’s blessing, Goldman valued Facebook at $50 billion, confirming private valuations from SecondMarket, a market for shares in privately held companies. DST is a subsidiary of Mail.ru, backed by billionaire investor Alisher Usmanov, and also has investments in Zynga and Groupon, among other things.  Facebook’s padlocked finances have fueled speculation, leading to much debate about the elevated estimates and the capacity for billionaire Mark Zuckerberg’s company to grow. Regardless, Goldman Sachs appears to have the firepower to pull off the offer without its American investors. A total of about $7 billion in orders for Facebook shares have come in, with strong demand from Chinese investors, reports the Journal, citing a person familiar with the matter.  Monday was an action-packed day for technology and internet investors. Apart from the Facebook ordeal, Apple’s CEO, Steve Jobs, has announced he will be taking a leave of absence to concentrate on his health. The news has sent the company’s Frankfurt-traded shares down more than 7%, as markets remained closed in the U.S. due to Martin Luther King Day. (See Steve Jobs Taking Medical Leave of Absence, Shares Drop).
The investment bank decided to limit the $1.5 billion investment to non-U.S. clients in an attempt to appease the SEC.