(BN) Goldman Sachs May Sell, Hedge Facebook Stake Without Warning to Investors

This is an omen to warn of the impending bubble in technology companies. Correct me if I am wrong but isn’t FB generating about $500mm a year in revenue? At a $50B valuation that means that these investors are paying 100x top line sales for a company whose business model could be disinter-mediated overnight. Who in their right mind would lock up money in a deal where the most upside to the investment is 100%, tops, and that is assuming what is currently massively overvalued becomes shit-balls overvalued and then of course that you can get out before the balloon deflates. No city slicker will ever be able to convince me that at user generated content site whose primary purpose is to serve the underemployed will be able to reasonably fetch a valuation of $100B. If that happens then I suppose we might also see Osama Bin Laden lay down his arms and declare America the best country in the world. Goldman Sachs clients may be rich and might be presumed to be smart, but any moron clamoring for this deal is just a plain old fashioned sucker.

Bloomberg News, sent from my iPhone.

Goldman Sachs Says It May Sell, Hedge Facebook Stake

Jan. 6 (Bloomberg) — Goldman Sachs Group Inc. clients considering whether to buy shares in closely held Facebook Inc. should take heed: Wall Street’s most profitable securities firm could unload its own holdings without letting them know.

In the last sentence of a one-page investment profile sent to private wealth clients, the firm explains: “GS Group may at any time further reduce its exposure to its investment in Facebook (through hedging arrangements, sales or otherwise), without notice to the fund or investors in the fund.”

The offering document, obtained by Bloomberg News, shows that $75 million of the $450 million investment in Facebook by Goldman Sachs is coming from Goldman Sachs Investment Partners, a hedge fund that handles client money. The firm’s own $375 million investment will probably be cut to $300 million because Goldman Sachs expects to sell $75 million to third parties or to the fund it created so clients could buy a stake in Facebook.

“There may be conflicts of interest relating to the underlying investments of the fund and Goldman Sachs,” according to the Facebook offering document’s disclosures section. Material in the documents “is not guaranteed as to accuracy or completeness.”

Goldman Sachs paid $550 million in July to settle fraud charges filed by the Securities and Exchange Commission relating to the 2007 sale of a mortgage-linked investment called Abacus. The company said it made a “mistake” by failing to inform clients in the 2007 deal that it allowed a hedge fund betting against the investment to help put together the deal.

Stephen Cohen, a Goldman Sachs spokesman in New York, declined to comment yesterday. Jonathan Thaw, a spokesman for Facebook, also declined to comment.

Rules for Clients

To get a stake in Facebook, Goldman Sachs clients are required to make a minimum investment of $2 million by Jan. 7 in what’s described as limited partnerships based in the Cayman Islands and Delaware. Goldman Sachs is charging 0.5 percent of any capital committed to the partnership as an “expense reserve” as well as a 4 percent placement fee and 5 percent of any gains, according to the document.

Facebook has more than 600 million monthly active users, of whom more than 230 million access the site on mobile devices, the document shows. Statistics available on Facebook’s website indicate it has more than 500 million monthly active users and more than 200 million access from mobile devices.

A letter addressed to “potential investor” that introduces the Facebook investment profile ends with a two- sentence paragraph. The first asks potential investors to contact a Goldman Sachs representative for further information. The second says:

“Do not contact Facebook.”

To contact the reporters on this story: Max Abelson in New York at mabelson Christine Harper in New York at charper

To contact the editor responsible for this story: David Scheer at dscheer .


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