“Private” placements of securities: A London view of the Facebook saga

March 19, 2012

According to a story in the New York Times, on Sunday night, 2 January 2011, Goldman, Sachs & Co. sent a number of its wealthy U.S. clients an e-mail offering them the opportunity to invest in an unnamed “private company that is considering a transaction to raise additional capital.” The story identified the company as Facebook and the offering a U S $1.5 billion sale of common stock with a US $2 million minimum investment and a lock-up until 2013. On 21 January, Facebook announced that Goldman Sachs had “completed an oversubscribed offering to its non-U.S. clients in a fund that invested $1 billion in Facebook Class A common stock.” Goldman Sach’s decision to exclude its U.S. clients from the Facebook offering highlights some fundamental differences between U.S. and European securities regulation and practice and has prompted the U.S. Securities and Exchange Commission (SEC) to re-evaluate its private placement rules.

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