Goldman Sachs (GS) which had already invested $450 million in social networking site Facebook, decided to restrict its scale of shares to investors outside the United States. Goldman Sachs is expected to raise as much as $1.5 billion from investors for Facebook. Facebook would certainly benefit from not being seen as a totally US owned company.
The Goldman said, “the shares will be restricted to non-US investors because, the level of media attention might not be consistent with the proper completion of a US private placement under US law.” “In light of this intense media coverage, Goldman Sachs has decided to proceed only with the offer to investors outside the US,”
Foreign investors will now have the chance of buying $1.5 billion of Facebook shares at a $50 billion valuation when secondary markets are already valuing Facebook at $70 billion. Foreign investors will be allowed to take part in the deal because regulations overseas regarding public solicitation are less strict.
The move is likely to prove unpopular with the U.S.-based Goldman clients who reportedly had placed more than $7 billion in orders for Facebook shares, more than four times the amount available.
In a statement Monday, Goldman said the offering was rejiggered after the New York company “concluded the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law.” The decision, made last week and announced to clients starting Sunday night, wasn’t “required or requested by any other party,” Goldman said.
Under an SEC rule known as Regulation D, private placements like the Facebook deal “cannot be the subject of advertising, general promotional seminars or public meetings in connection with the offering.”
Rules outside the U.S. governing private placements are less strict about publicity as long as the deal is offered to individuals and institutions that qualify as “professional investors.” Goldman likely won’t come under fire in foreign markets for the hype that has accompanied the offering.