Facebook, Goldman Sachs Deal Bars Americans

Goldman Sachs' recent announcement that it will invest hundreds of millions in the social network firm Facebook, valuing the company at billions more than its prior estimate, raised serious questions about legality.

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Facebook has thus far avoided going public and listing its shares on the stock market, a fact attributed to the secretive and controlling nature of founder and CEO Mark Zuckerberg who does not want to have to compile with financial disclosures required for publicly traded firms or risk losing control of the firm.

The Goldman Sachs deal was an effort by Facebook to secure funds without having to be publicly listed. But there was a catch: American law mandates that any firm with more than five hundred share holders has to adhere to SEC filings. Goldman's take in Facebook would be a way for its top clients to invest in the firm, and likely tipping Facebook share holders over 500. But Goldman argued, unconvincingly, that its investment constitutes one owner since clients are investing through a single firm. Facebook would not agree to the deal if it would require it to meet SEC mandates, and Goldman tried to salvage it through highly dubious reasoning. Of course, this was unconvincing. Clients are clients no matter if a single investor manages their assets.

So Goldman has conceded the point and will disallow its American clients from partaking in the Facebook deal. Another financially dubious maneuver for Sachs which undermines financial transparency and another illustration of the tawdrily nature of Facebook's CEO and his unbecoming demeanor.