Will Goldman’s Investment Vehicle In Facebook Be Ruled Illegal By SEC?

Posted Jan 4, 2011

Yesterday I wrote about how Goldman Sachs and DST is investing in Facebook at a $50 billion valuation. The two companies are investing $500 million. It turns out that Goldman Sachs is setting up a “special purpose vehicle” to allow their wealthy clients to invest in Facebook, which is still a private company. However there is an SEC rule that may consider this move illegal.

According to Dealbook:
“While the S.E.C. requires companies with more than 499 investors to disclose their financial results to the public, Goldman’s proposed special purpose vehicle may be able get around such a rule because it would be managed by Goldman and considered just one investor, even though it could conceivably be pooling investments from thousands of clients.”

James Angel, a finance professor at Georgetown University, said that the special purpose vehicle would be deemed illegal if it got around the above SEC rule. It turns of demand for the special purpose vehicle that Goldman supposedly set up, there is a lot of demand from their wealthy clients. Any client that wants to get involved must have a net worth of at least $10 million. Goldman is reportedly going to invest $450 million and is expecting to raise $1.5 billion from investors.