If you think that Goldman hasn't done their homework, and consulted with their very close buddies at the SEC, then you're crazy. These guys have proven over the past several years in particular that they are the gods of finance, and if there are rules and regulations in their way, they will either find a path around them or convince government officials to craft a new hole instead.
While I don't believe GS is immune to errors, I don't think it's that unlikely that they might have foreseen this. It's such an ugly hack that they couldn't have expected it to go unnoticed, especially since it seems to me they (directly or indirectly) were the ones to tell the press about it. It feels like the Media/SEC reaction is, so far, playing by the book, utterly predictable.
So the real question is, did they let Facebook know this was going to happen?
If yes, then perhaps this is a media coup to frienzy up interest into the soon-to-come IPO. Perhaps they'll cancel the whole deal now, but the $50b valuation will remain in people's heads as a "good deal" that "high net worth individuals" were willing to invest at. This might help drive a traditional IPO price upwards.
If no, then perhaps this is GS's attempt to force Facebook to IPO, so they can make a few billions along the way. It's always nice to have a billion or two extra on the balance sheet, even when you're GS. Then again, it's not good business practice to screw over your clients, and somehow I don't think that's what happened.
In either case, I think the SEC should look long and hard at its rule book and see if there is any way it can bar GS from being the senior lead in the IPO. Oh wait, the SEC is made of former GS employees. Nevermind.
Reporting it as a fraction of trading profits is a confusing thing to report.
After all, Goldman has lots of non-trading costs: buildings, salaries, software licenses, vendor payments, etc. It was actually 15.5 days of profits for Goldman, plus the $90 million Goldman lost on the deal itself.
(Goldman wasn't just a perpetrator, they were also one of the victims. If you believe the SEC, Goldman helped Paulson to defraud themselves as well as others.)
The U.S. Securities and Exchange Commission won court approval to levy a $550 million penalty against Goldman Sachs Group Inc., the largest ever against a Wall Street firm, over claims the bank misled investors in collateralized debt obligations linked to subprime mortgages.
Thanks for the reference. I was on my phone, thought it was known well enough and so I didn't give more details. Will try to give more details next time.
This article misses a very important point: that Facebook wouldn't be required to start reporting its financial earnings until May 2012, 120 days after the last day of its current fiscal year. http://mashable.com/2011/01/03/facebook-ipo-may-2012/
This week's move essentially buys Facebook 16 months of time until it has to IPO. So yes, Facebook will essentially have to go public, but it won't be for a while.
Goldman and Facebook knew exactly what they were doing.
After reading this, I can believe GS & Facebook are hoping the 'Special Purpose Vehicle' lets Facebook get further liquidity while staying private, while remaining ready for the SEC to rule against them, forcing public reporting.
At which point, they mock-begrudgingly reveal numbers better than anyone had expected, setting up a monster IPO as a consolation prize.
Anybody think maybe Facebook got pwn'd by GS? As in, maybe Facebook's financials aren't that great and they wanted the GS money. GS offers a deal with the mock-promise that they'll deliver a special vehicle to get around the 500 IPO rule, when they really just want to flip FB shares to the public and pre-ipo traders for a short term profit.
haha that would be classic GS. "Um sorry we were wrong about the IPO rule." However, there is no IPO rule -- the rule only requires public disclosure of financials, not public ownership.
They may be forced to disclose financials, but they can't be forced to do an IPO. Those are two different (but often interchangeable) things. I'm not sure if the restrictions on executives of public companies apply to all that must disclose their financials, or only companies being traded on the exchanges.
>A reminder: If Facebook is forced to register, it will not HAVE to offer stock to the public. But since it will be forced to disclose its financials anyway, we expect the company will go ahead and offer up some second class (non-voting) shares.
Facebook is aware of the rule in question. The Facebook restricted stock plan was designed so that the participants are not considered stock owners. I doubt that Facebook went ahead with this deal without carefully examining the issue.
Basically since the restricted stock holders are employees that didn't directly invest money they're not being considered as counting against the 499 limit (which to me seems perfectly fair).
And not because Goldman has some special agreement with the secret organization that runs the government from behind the curtain, but rather because they read the laws, consulted with lawyers, and developed a business plan that is within the context of the law.
Eh, the close relationships and revolving door between the financial industry and government are well known phenomena. No tin foil hat conspiracies are required for expecting them to be above the law and get away with a hell of a lot. They've thoroughly demonstrated that they are quite capable in this regard.
Well, it's more like the "revolving door between industry and the government". The government makes lives easier for every industry; health insurance companies, the airlines, the automakers, the utilities, the postal service, Hollywood... everyone.
> The government makes lives easier for every industry; health insurance companies, the airlines, the automakers, the utilities, the postal service, Hollywood... everyone.
except for the part where govt says "nice little industry you've got there, be a shame if something happened to it". That is, the "make lives easier" often comes after "make lives harder" and/or consists of not following through on a threat to "make lives harder".
I don't know why this is getting downvoted. It's not like cynicism with respect to the financial industry in America isn't a perfectly logical position to... oh right HN is about 80% libertarian troglodytes who don't have a single thought they didn't read in a book by Ayn Rand. Carry on.
This comment really adds nothing to the discussion. I imagine if people were downvoting the parent comment, it is because they made an extraordinary claim (GS is immune to US law), without providing any evidence. We're downvoting you because you's trollin'.
Not really trolling, at least not intentionally. The parent was glib, sure, but I see comments such as that all the time in more technical discussions on HN and they pass unremarked or even upvoted. Yet when it happens in a political discussion people lose their shit because we're all expected to be a bunch of little Montesquieus around here nowadays. Fine, GS is not literally immune to US law, but surely you can imagine how someone might think that, in certain respects, they may as well be or they appear to be. And there is nothing wrong with making a snarky comment to that effect when it is clearly not meant to be taken literally.
I don't know if HN was always like this and we have more political links on here recently, or if it's a change in membership composition, but from what I can tell the range of allowed opinion in political discussion has greatly narrowed over the past six months or so compared to that in technical discussion. And that's too bad.
I made a relatively anti-capitalist comment last night and got voted up. I dislike the 'finance industry,' yet I voted your above comment (the second one, not the original) down.
It's about how you say it, not what you say. Also, you can't particularly be upset if the vast majority of startup founders are super pro capitalism; this is sorta ground zero for all of that, eh?
Well, I don't think there have been any anti-capitalist statements made here, unless you consider Wall Street an example of capitalism. And, I don't see any conflict between being a startup founder and suggesting that Wall Street does more harm than good.
I've made quite a few comments that were upvoted detailing things I learned on 4chan and what I like about that site. I'd think it's safe to say 4chan is not highly regarded around here. The key is to present your views in a way that people on HN will appreciate, say, to satisfy their intellectual curiosity.
If I say, "4chan FTW, lulz!", I will get downvoted, and rightly so. Compare:
"I think a lot of people on HN tend to dismiss 4chan as juvenile and immature without giving due regard to its tremendous creative potential and brand recognition. Just look at the Cheezburger Network, a multimillion dollar company whose sole business model is to recycle 4chan memes. Additionally, it would be hard to name a site as seemingly pointless as 4chan that enjoys its popularity or notoriety. Even Someething Awful, which arguably did what 4chan does, but better, never enjoyed the number of users or visibility that 4chan does. It's clear they're doing something right, even if they manage to piss just about everyone off."
Now I've presented a contrarian opinion in a way that presents a clear argument for why I hold it. These types of posts are far more palatable to people who, really, are just looking for interesting things to think about.
I didn't get through much of Atlas Shrugged, but I'd have to agree with this. Rand didn't admire large corporations, she admired the highly talented individuals that (supposedly) made corporations successful despite themselves.
