Economics / Media

Goldman Sachs has taken a sizable financial stake in Facebook. If You Make Money, They Will Come.

“The “great vampire squid” of finance, Goldman Sachs, has invested $450 million in the emerging great vampire squid of cyberspace, Facebook. As the New York Times’ DealBook reported, the deal is gives Goldman a leg up on the huge fees investment banks will get when the social-networking company eventually sells shares to the public. And as the Times and Wall Street Journal also report, Goldman will also haul in huge fees from those clients who want to invest themselves.
“Opacity is a growing issue. A thriving shadow marketplace has emerged for big startups that haven’t done IPOs, so big that the Securities and Exchange Commission is, at least in that space, looking into the wheeling and dealing. For good reason: Many if not most of the investors in these markets have no idea what the true financial picture may be of the shares they’re buying.”


http://www.salon.com/technology/facebook/index.html?story=/tech/dan_gillmor/2011/01/03/goldman_sachs_s_social_networking_play

Terms for entry into the ‘special purpose vehicle’ are pretty steep. Apparently, they’re modeled on that other practical financial instrument – the Kardashian Kard.

“To even be considered, (investors) reportedly have to have a net-worth of at least $10 million. Additionally, CNBC reports that would-be investors will have to pay steep fees up to 5 percent up front and more on profits earned. Goldman will reportedly invest $450 million, and is expected to raise up to $1.5 billion from investors.”

http://www.huffingtonpost.com/2011/01/04/goldman-sachs-facebook-deal_n_804040.html

“With Goldman’s investment in Facebook, we have a front-row seat to the process by which Wall Street creates and inflates financial bubbles.”

http://opinionator.blogs.nytimes.com/2011/01/04/friends-with-benefits/?hp

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