Investing in Facebook鈥oldman-style
Goldman Sachs is controlling the Facebook IPO. Good news for Goldman's favorite investors, bad news for everyone else, says guest blogger Addison Wiggin.
In this Oct. 13 file photo, Facebook founder Mark Zuckerberg speaks in the Galileo Auditorium on Microsoft鈥檚 Silicon Valley Campus in Mountain View, Calif. As the company prepares to go public, its chosen IPO underwriter, Goldman Sachs, skips some key professional courtesies, says guest blogger Addison Wiggin.
Jeff Chiu / AP / File
Gee, we couldn鈥檛 possibly have seen this coming: Goldman Sachs says they鈥檒l stop taking orders from its 鈥渉igh net worth鈥� clients for shares of Facebook. And some of those clients have been told they鈥檒l have to settle for far fewer shares than they want, so intense is the demand.
This is according to The Wall Street Journal, citing 鈥減eople familiar with the situation鈥� 鈥� as if Goldman doesn鈥檛 really want this information put out there to further gin up demand for the inevitable IPO.
鈥淲hen you have a chance,鈥� reads the Goldman solicitation to its clients, 鈥淚 wanted to find a time to discuss a highly confidential and time-sensitive investment opportunity in a private company that is considering a transaction to raise additional capital.
鈥淔or confidentiality reasons, I am unable to tell you the name of the company unless you agree not to use such information other than in connection with your evaluation of the investment opportunity and to keep all information that we reveal to you strictly confidential.鈥�
Any resemblance between this and a Nigerian email scam is purely coincidental. At least it wasn鈥檛 in all caps.
鈥淚t looks to me like that鈥檚 typical of what the investment banks have been doing for the past decade, which is trading paper for profits, instead of investing in revenue streams,鈥� we told Tech News World this week.
Unfortunately, in the process of editing the article, our central point got lost: How the whole thing smacks of a Ponzi scheme. Goldman鈥檚 clients get the big gains, while the IPO investors will be left holding the bag. Plus, it looks like the deal as it鈥檚 structured with Digital Sky Technologies gives Goldman鈥檚 clients a built-in out鈥ven before the IPO.
Good position, if you can land it.
But the question remains: If Goldman writes to its best clients in language that treats them like everyday marks in a wire-transfer scheme, imagine what it thinks of the schlubs who鈥檇 buy publicly traded shares.
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