Goldman Sachs or Goldman Sulks?
Investment firm decides to teach SEC a lesson by excluding U.S. clients from Facebook deal
Goldman Sachs thinks securities regulations are for losers, wimps and socialists.
This, of course, makes the company no different than any other investment firm on Wall Street. After all, that excessive governmental oversight and scrutiny is bad for business -- "excessive" being defined as "any" -- is the official credo of the Masters of the Universe Capitalist Club.
(Also see: Facebook financials revealed! Well, some of them)
Which probably explains Goldman's decision to exclude its U.S. clients from the $1.5 billion private offering of shares in Facebook, as reported by the Wall Street Journal:
Goldman said the move came after officials at the New York securities firm "concluded the level of media attention [surrounding the Facebook offering] might not be consistent with the proper completion of a U.S. private placement under U.S. law."
I'm not sure Goldman's U.S. investors, many of whom were hand-delivered documents from Goldman less than two weeks ago soliciting their interest in Facebook, will understand the reasoning behind that somewhat cryptic explanation. Really, what's Goldman actually saying here? That the nosy Securities and Exchange Commission is going to be asking too many questions? Or worse, that the SEC might make Goldman comply with some meddlesome securities regulations?
Avoiding U.S. legal requirements could be one motivation. Another could be that Goldman is punishing all U.S. investors because some (or at least one) ignored the investment firm's repeated requests not to leak details of the Facebook offering to the blabbermouth media. But why punish all investors for the actions of a handful? That strikes me as petulant and emotional. Plus, well, the cat's already out of the bag.
Supposedly the offering has attracted $7 billion in orders from U.S. investors, far more than the amount being offered. The WSJ said a "person familiar with the offering" indicated that there's strong interest in the private Facebook shares in China alone, so Goldman likely will be able to scare up enough interest abroad. In other words, it really doesn't even need U.S. investors.
I think Goldman's motivations go far beyond the Facebook deal. This is about sending a message to Washington, the message being that Goldman is more than willing to take its business beyond U.S. shores as long as it must contend with what it considers to be burdensome securities guidelines. And what better way to get the attention of politicians than to have a bunch of angry, wealthy U.S. investors bombarding them with complaints that some picky SEC laws cost them an opportunity to take part in the latest investment of a lifetime?
Which is exactly what's going to happen. Cue the calls for the SEC and other government regulators to back off and let the Masters of the Universe work their magic.
Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.