CT Blue

Are the criminals at Goldman Sachs at it again?

Here, we find that a gold-plated division at Goldman, whose investors appear to be made up in large part of Goldman insiders, passed on the very Facebook deal that Goldman is now peddling to outsiders.

Here, we find that the Facebook deal is structured in a way to allow Goldman to peddle Facebook shares to outside investors without having to provide them the type of information that they would be required to provide if the stock were issued publicly. They are, unless I am mistaken, essentially peddling an Initial Public Offering while deleting the public part.

After news broke of the investment by Goldman Sachs in the social networking site Facebook, a harsh spotlight was cast on a nearly 50-year-old law that limits the number of shareholders in a private company.

In 1964, regulators started requiring companies with more than 499 shareholders to publicly report their financial results. It is a rule that has been debated from the outset — and the issues raised now are the same ones raised then.

The Securities and Exchange Commission is examining the frenzied buying and selling of Facebook shares and other private technology companies in the secondary market.

To some, the structure of the Goldman deal merely looks like a way to circumvent the law. Through a special purpose vehicle, the firm could potentially pool money from thousands of wealthy clients and still be considered one investor because the entity would be managed by Goldman.

Once again, Goldman has apparently created another heads it wins, tails the investors lose situation. Ultimately, it would appear, Goldman will not truly invest any of its own money in Facebook, though it clearly stands to gain big time if the stock price goes up, just as it stands to gain big time if the investment tanks, because it is making a huge profit on the sale of what is, in all but name, stock.

In this particular instance we can’t feel too sorry for the gullible folks who are bidding this “stock” up, and, after all, it might ultimately prove to be a good investment. But we should be just a bit wary about letting Goldman break the law again in order to create money for itself out of thin air. Like the last time, it will come to no good for the rest of us, while if history repeats itself, as no doubt it will, Goldman emerges unscathed.