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Goldman Invests $450m In Facebook 228

Posted by CmdrTaco
from the super-poke-me dept.
An anonymous reader writes "The news that Goldman has taken a stake in Facebook, the white-hot social networking giant, has tongues wagging from Wall Street to Silicon Valley. As first reported by DealBook, Goldman has invested $450 million in a deal that values Facebook at $50 billion. As part of the deal, Goldman is looking to raise as much as $1.5 billion from its wealthy clients to invest in Facebook alongside the firm."
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Goldman Invests $450m In Facebook

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  • Can't resist ... (Score:5, Insightful)

    by johnhennessy (94737) on Monday January 03, 2011 @01:33PM (#34745112)

    Did evil just become even more evil while I was sleeping over New Years ?

    Goldman Sachs aren't exactly known for their "good values".

    Why the hell does an investment bank, who normally act as a "service provider" want to take a direct stake in a Social networking company ?

    • Demographic Data (Score:5, Interesting)

      by MoonBuggy (611105) on Monday January 03, 2011 @01:36PM (#34745148) Journal

      Why the hell does an investment bank, who normally act as a "service provider" want to take a direct stake in a Social networking company ?

      Well theoretically Facebook's "product" is demographic data for marketing purposes - Goldman Sachs obviously think this is a profitable segment. What I've said before, and will say again, is that I'll never truly believe that marketing data can provide that much value. Obviously some very successful people think differently, so it may well be that I'm just outright wrong, but when I look at the value of Google and Facebook, who might provide slightly better ways to convince people to buy your product, and compare those valuations to those of the companies who actually make popular, profitable and tangible products, it just seems like there's something not quite right here. Bubble 2.0, perhaps?

      • by durrr (1316311) on Monday January 03, 2011 @01:39PM (#34745184)
        Some very sucessful people crashed the worlds economy, while getting filthy filthy rich at the same time.
        One mans poison is another mans profit.
      • Re:Demographic Data (Score:5, Interesting)

        by div_2n (525075) on Monday January 03, 2011 @01:47PM (#34745292)

        If FB can figure out how properly utilize the data it has to properly send target advertisements in an unobtrusive way, they will be able to do what nobody has to date -- compete with Google on the advertising front.

        This makes them supremely poised to be the ultimate competitor to Google for advertising dollars (which last I heard is the bulk of Google's profits). Note this doesn't make them a direct competitor to Google per se, but certainly it makes them capable of putting one heck of a dent in Google's bottom line.

        • by MoonBuggy (611105) on Monday January 03, 2011 @01:55PM (#34745360) Journal

          That still hinges on the assumption that targeted marketing is so beneficial that it's worth all these billions of dollars. Maybe it is, maybe I'm wrong - I'm just some guy and I'm arguing with billionaires here, after all - but it looks to me like they're building something of a house of cards that'll come tumbling down if the companies purchasing the ads ever manage to quantitatively assess their impact.

          • by div_2n (525075)

            I think it makes great logical sense that heavily targeted advertising would be more successful than generalized advertising.

            Have you ever been on a heavily populated beach resort area and seen one of the planes go by pulling an advertisement? Which do you think would be more effective for one of those planes in the dead of summer in a hot place -- an advertisement for tanning lotion or one for heavy winter coats?

            I see targeted advertisement based on demographic data as an attempt to be smart in similar way

          • I don't believe that Facebook is worth the valuation financial media (and institutions) are touting today (>$50B). And I'm not sure Goldman intends to keep its investment in Facebook for a long time. I suppose they are trying to find as many suckers as they can, push Facebook through IPO with share price inflated several times, then sell their investment with profit to unsuspecting public, pension funds etc. (a.k.a. suckers), collect fees/profits on it and leave everyone with the bag. Watching banking s
            • I don't believe that Facebook is worth the valuation financial media (and institutions) are touting today (>$50B). And I'm not sure Goldman intends to keep its investment in Facebook for a long time. I suppose they are trying to find as many suckers as they can, push Facebook through IPO with share price inflated several times, then sell their investment with profit to unsuspecting public, pension funds etc. (a.k.a. suckers), collect fees/profits on it and leave everyone with the bag.

              This. "Social networking" websites are not long-term investments. There was once a time when everybody thought that no one would ever catch up to the market share of AOL instant messenger. It wasn't two years ago that all the kids were using Myspace. How is Facebook different?

      • Re:Demographic Data (Score:5, Informative)

        by Low Ranked Craig (1327799) on Monday January 03, 2011 @02:27PM (#34745714)
        This all makes sense now. This is the real reason California, and likely other states will criminalize using bogus demographic information in your profile. If you do so you are depriving Goldman Sachs of their rightful revenue from selling your personal info, therefore you have defrauded or harmed the corporation. I mean, it's not like Goldman Sachs owns any congress critters or would ever contribute to completely fucking up an economy only to have the government write them a big check for their efforts.
        • Re:Demographic Data (Score:5, Interesting)

          by Anonymous Coward on Monday January 03, 2011 @03:59PM (#34746742)

          People still don't get it. That massive global derivatives trade that is larger than world GDP? Guess what's backing it. It's not just your savings. It's not your retirement account. It's not your mortgage. Not even your tax dollars.

          It's you.

          And anyone who can know all about you, can gain an incredible edge in the new order of global trade. In the new reality, that the world is a closed system. That the economy operates on knowable variables. And that it can be solved. They are building the Google of global finance.

          And, to do that, they've put a bullseye on your most intimate details. They want to know your business contacts. They want to know your friends. They want to know who influences your decisions. They are building a map. Forming connections. They want to know what you eat. They want to know how often you exercise. They want to know what drugs you take. What television shows you watch. They want to know how the dominos fit together. They want to know how a random person can say something to a secretary who says it to her boss which influences his perspective and brings down a major corporation, like a house of cards.

          Then they can make it happen. Bet against it. And profit. Checkmate.

          So there's quite a bit of money on the line. And somehow insurance companies aren't as useful as they once were. Somehow, the entire concept of random, evenly distributed risk probability curves has been replaced with a much more insidious, and manipulable, model. And you're right at the center. So, now, reliably modeling the global economy hinges upon controlling it's most unpredictable part: you.

      • by root_42 (103434)

        What I've said before, and will say again, is that I'll never truly believe that marketing data can provide that much value.

        It's not just marketing data. Both Google and Facebook are a massively huge platform on which you can present your products. If you're not on Facebook with your company, and if your product does not show up on the first page of a Google search, you have a problem as a big business.

      • by tukang (1209392)

        who actually make popular, profitable and tangible products

        A lot of people seem to have hang ups about FB not producing anything tangible but traditional media corporations such as Viacom don't produce anything tangible either and their business model has done just fine. Think of FB as a media corporation that has a global audience and the ability to display targeted ads. If Viacom is worth 25 billion then I don't find it so unreasonable to value FB twice as much.

      • Re:Demographic Data (Score:5, Interesting)

        by al0ha (1262684) on Monday January 03, 2011 @03:21PM (#34746286) Journal
        Everyone *thinks* Facebook's product is demographic data for marketing purposes, and at this point in history perhaps that is only what it is used for; however I would not personally feel comfortable believing this will continue to be the only use for all of the connections and information gleaned via Facebook, Google and myriad other data mining enterprises.

        The main point almost everyone is missing is that all data put in the *cloud* is there until the end of time, never to be reclaimed. That is a freaking long time peeps; and just as people could not comprehend the ability to land on the moon at the turn of the 20th century; we can not begin to comprehend the future uses, good or bad, for all the data people are currently freely giving up without a second thought. Goldman is obviously betting the payoff will be substantial; far more than mere marketing alone.

        In my lifetime we've gone from being upset when a person stood to close to the phone booth (with a closed door) while we were having a conversation, to loudly conversing and putting personal facts out there for anyone to use however they choose.
        • we can not begin to comprehend the future uses, good or bad, for all the data people are currently freely giving up without a second thought.

          Rev 13:16 KJV - And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads:
          Rev 13:17 KJV - And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name.

          Just sayin'

          • by Duradin (1261418)

            Zuckerberg may be evil but outside of delusions of grandeur he's not that Evil.

            And "just sayin'" has got to right up there with smilies and "with all due respect".

    • Why the hell does an investment bank, who normally act as a "service provider" want to take a direct stake in a Social networking company ?

      um... not to state the obvious... but because they're an investment bank and see a lot of money potential?

    • by Skreems (598317)

      Why the hell does an investment bank, who normally act as a "service provider" want to take a direct stake in a Social networking company ?

      Because they're one of the (supposedly) hottest companies around, and don't have public stock.

      Remember, Goldman isn't just providing a service to let other people invest. That's just a way to get a larger stockpile of money that they can use to leverage themselves deep into the stock market on their own positions. They could care less about the $20 commission on your

      • Aha,

        so more like a "we put our own money in there, so it has to be a good thing".

        reading the article properly helped a little bit ! :)

        • Erh... that's pretty much the point in investment, at least these days.

          The value of a company is no longer what it produces and the value of their products. "Value" has become something completely artificial. Today, the "value" is what some people think it would be worth. Whether that has any reflection in reality is secondary.

          Just think for a moment. Facebook has been "valued" at 50 billions. I can't properly picture that amount of money to be honest, and I'm no friend of cheesy comparisons ("you could get

          • by vlm (69642)

            The value of a company is no longer what it produces and the value of their products.

            net present value calculations are fairly meaningless in an unstable environment. Also I think you're confusing the revenue line on the profit and loss statement with the net worth on the balance sheet. Play some more "railroad tycoon".

            "Value" has become something completely artificial.

            What exactly is a "non-artificial" "value"? The only answer I can even think of is some sort of revealed religious answer, like turning one dude in for crucifixion has a value of X pieces of silver, and I don't think that defined "value" is too helpful in figuring out how

            • by KarrdeSW (996917)

              The only answer I can even think of is some sort of revealed religious answer, like turning one dude in for crucifixion has a value of X pieces of silver, and I don't think that defined "value" is too helpful in figuring out how much Facebook is worth.

              Really? I can think of plenty of ways that using facebook is like getting nails pounded into your body.

          • just remember that even though they'll likely lose a bit on each transaction, they'll make it up on volume!
          • by longacre (1090157)

            What would make a company that has no "real" assets that valuable?

            Their brand alone is a valuable real asset. The data mined from their users' profiles is for the most part very real, as well. Most of the value lies therein.

      • by u38cg (607297)
        Actually, Goldman is publicly traded, though the majority of stock is held by employees, ex-employees, or other investors who pre-date the flotation in 1999. Something like 12% of the equity is regularly traded. The answer will be something to do with the additional $1.5b that Goldman is raising from other partners. They will be tapping that somehow or other.
    • by assertation (1255714) on Monday January 03, 2011 @01:49PM (#34745304)

      Maybe they decided it was about time to invest in something successful

    • It likely means they are about to do an IPO. Facebook has been profitable for the last couple of years, so they don't really need more investors. Goldman is willing to do IPOs or anything else that will make them money.

      Reports were in 2008 that Zuckerberg had a 3 year plan. Looks like this is the ending.

      Incidentally, Facebook is not stock I would buy, except perhaps for the initial jump after the IPO. I have trouble seeing it as a good long term growth investment. But then I've been wrong before.
    • Heh, I just found out Goldman was a major investor in Webvan [wikipedia.org], so apparently they have a long, distinguished history of investing in illustrious startups. :) No I'm off to investigate if they ever invested in Zombocom.......
    • Why the hell does an investment bank, who normally act as a "service provider" want to take a direct stake in a Social networking company ?

      Eventually Facebook will do an IPO. This will result in huge fees and favors for the underwriter. This deal makes it very likely that underwriter will be Goldman Sachs.

      Also, Goldman Sachs is not just a "service provider". They make most of their money trading on their own account. Of course, this is a huge conflict of interest, but if their clients are willing to accept that, why should I care?

    • by I8TheWorm (645702) *
      So they're first on the list for handling the Facebook IPO?

      OT a bit, but I still can't believe people help push up the valuation of Facebook by keeping their content there with all of the security fiascos and Zuckerberg quoted as having said "they trust me, dumb f**ks." That was, of course, back at Harvard when he was snooping in emails based on account login information, but I believe once a douchebag, always a douchebag.
    • by Dan667 (564390)
      rupert murdoch bought myspace. A lot of these people don't know what they are doing with regards to the internet.
    • They were not surprised by the meltdown. They didn't need TARP money. They should have gone bankrupt as people with good values at Bear Stearns, Lehman Brothers and countless others did!

      If being smarter than your competition is evil, then I welcome evil.
    • by dachshund (300733) on Monday January 03, 2011 @03:31PM (#34746398)

      Why the hell does an investment bank, who normally act as a "service provider" want to take a direct stake in a Social networking company ?

      Two words: regulatory arbitrage [thinkprogress.org].

      US law currently prevents Facebook from taking on more than 499 investors unless it discloses its financial results to the public. Facebook does not want to do this, but it certainly wants investment money. Plus there's a lot of dumb money out there that would love to invest in Facebook. How to get around this?

      The answer is, apparently, to take on a single investor --- Goldman Sachs. G-S will then sell "shares" of their stake to their own investors, collecting a handsome commission along the way. Most likely the investment house won't even wind up with too much exposure of its own, so when Facebook inevitably dot-bombs they'll just be sitting on a pile of cash. Plus there are opportunities here to make and return profits to their preferred clients (as the stock goes up), making sure that only the fools get stuck when it plummets.

      Normally it wouldn't bother me too much to see rich people getting fleeced, but how much do you want to bet that somehow your money will wind up in that pool, even if it's indirectly through mutual funds and third-party companies?

    • 1) Goldman Sachs is using this investment as a tool to let their investors and partners invest. They are forming a Special Purpose Vehicle to allow this. This works around the SEC requirement that a non-public company can have at most 500 investors.
      2) Goldman is now a front runner for any IPO that facebook does. IPO fees are something like 2-4% of the value of the company. On a 50 Bn valuation, Goldman can make about a billion in IPO fees alone.
      3) Most likely this stake will also be used as a compensation
  • by sstamps (39313) on Monday January 03, 2011 @01:34PM (#34745118) Homepage

    Goes hand-in-hand with the modern-day Farcebook version:

    Fools and their privacy..

    • by Seumas (6865) on Monday January 03, 2011 @01:36PM (#34745158)

      Only the American tax-payer is the fool, here. This is a can't-lose wager, for everyone else. You invest and get rich or you invest and get re-imbursed by the American tax-payer next time the government decides to save the speculators by handing them a few trillion.

      Remember, the current president and last president decided that speculation should no longer have any risk and backed that up with seven or eight trillion dollars in handouts. Hurrah!

      • Only the American tax-payer is the fool, here. This is a can't-lose wager, for everyone else. You invest and get rich or you invest and get re-imbursed by the American tax-payer next time the government decides to save the speculators by handing them a few trillion.

        Remember, the current president and last president decided that speculation should no longer have any risk and backed that up with seven or eight trillion dollars in handouts. Hurrah!

        I was going to say the same, so I have nothing to add except: mod parent up!

        OK, well, there's one thing I would like to add as a commentary: this transaction is emblematic of the current US economy: speculation, criminal institutions that are too big to fail, and a social network valued at billions$.

      • > Only the American tax-payer is the fool, here.

        Not sure what you mean.

        Are we fools for paying taxes? The alternative is big men with guns confiscating our possessions and imprisoning us.

        Are we fools for bailing out bankers? That choice wasn't a checkbox on our tax forms.

        Are we fools for approving the Goldman/Facebook deal? Again, not a tax form checkbox.

        Are we fools for not arming ourselves and shooting somebody? Who would you want us to shoot?

        • by brainboyz (114458)

          Fire those that pass the taxes, and make it known why.

          Again, fire those that bail out the bankers, and make it known why.

          Goldman/Facebook is a private deal, but if they get bailed out then see point #2 above.

          Yes, but that's a much deeper issue.

        • Who would you want us to shoot?

          Whom, you ignoramus!

      • by Viewsonic (584922) on Monday January 03, 2011 @02:17PM (#34745614)

        It's a good thing tax payers have made all that money back with interest then, isn't it?

        I think you forgot to mention that part.

        • Tells me they really didn't need the money then!
        • by Seumas (6865)

          First, bullshit. In total, the government handed out more than seven trillion dollars in emergency spending/bailouts (and in some estimates, as much as 9, 11, or even 15 trillion). TARP, which was repaid, was only a very small portion of it. And with that, the amount repaid wouldn't even cover inflation.

          Second, you're missing the point that speculation is supposed to be just that. Speculation. If we're backing investments with tax payer money, it's no longer speculation and we're even more prone to further

        • by witherstaff (713820) on Monday January 03, 2011 @05:06PM (#34747470) Homepage

          They were able to use further loans from the gov to pay back the TARP funds. I know GM did this [reason.com], not sure how widespread it is among TARP recipients. So they went around and got another loan, paid back the original loan, and everyone's happy.

          As to G-S, give me access to 0% loans direct from the fed and I'm sure I can make money too. Like oh, use these no interest loans to buy government bonds that return 5%. [seekingalpha.com]. That's right, we give these bastards money at no charge so they can turn around, buy government debt, that we as taxpayers pay back at a 5% charge. Sweet! No wonder so many NY Stock exchange board members jumped onto G-S when they became a bank specifically to allow them to get bailout money.

          Do this scam enough and the facebook money is nothing.

        • That's just the TARP money. You also have to look at what the Fed is doing. Giving Loans to Goldman Sachs at 0% -> GS buys US Treasuries and pockets the interest. Tax payers lose, Goldman Sachs wins.
      • by troll -1 (956834)

        Only the American tax-payer is the fool, here. This is a can't-lose wager, for everyone else. You invest and get rich or you invest and get re-imbursed by the American tax-payer next time the government decides to save the speculators by handing them a few trillion.

        Nah, I invest and the tax payer never reimbursed _me_ when I lost. Historically the American economy has outperformed all others because it embraces laissez faire capitalism that allows people to accumulate wealth so they can invest. If you have another system please run for office but consider that overly regulated markets without entrepreneurial investment have failed in the old Soviet Union, been abandoned by the Chinese, and caused stagnation throughout South America.

        A lot of people seem to be agains

  • by teknopurge (199509) on Monday January 03, 2011 @01:34PM (#34745132) Homepage
    Aside from development I trade as a second-job.(I'd call it a hobby but hobbies cost money.) The net result of this valuation is marketing hype. Regardless who think what FB's eyeballs are worth, this is a point-in-time snapshot of FB's worth. Based on trading experience, if this was publicly traded right now I would be opening a vertical put spread.(i.e. be massively short) It feels and smells like an overrated athletic team.
    • by Esteanil (710082)
      "Markets can remain irrational a lot longer than you and I can remain solvent" - A. Garry Shilling
    • by DCFusor (1763438)
      Agree -- it's not worth that much. Question is, and we can't know yet, is Goldman going to be short it while/when/if they pull in enough other investors...

      I online trade all day every day these days, and now it's software that's the hobby. One of the better pieces of advice I ever got from a broker, back when I had one (online now, all the way) was "watch Goldman". Don't buy them, and sure don't listen to what they say -- watch them. You can make money riding the moves they make when they manipulate ma

    • by u38cg (607297)
      Always remember, the market can stay irrational longer than you can stay solvent. I remember telling people to ignore the dot-com bubble as a teenager and being laughed at for years. I told people the housing market was a mess and that buying a house was stupid, and we all know what happened there...
  • by unity100 (970058) on Monday January 03, 2011 @01:35PM (#34745140) Homepage Journal
    What could POSSIBLY go wrong ...
  • 12 billion bailout (Score:4, Insightful)

    by fermion (181285) on Monday January 03, 2011 @01:35PM (#34745144) Homepage Journal
    So our 12 billion in bailout money goes to invest a company that maybe makes a few million dollars of profit on at a least half a billion dollars in revenue. Combined with Groupon, can we say bubble? Can we say it is easy to flush money down the toilet when it is the taxpayers? Can we remember how signed TARP and the bank bailout, thereby giving all the taxpayer money to the banks and investment firms and raising the deficit to astronomical percentages of GDP. And we want to continue to give these crooks a free hand at destroying the middle class?
    • by timeOday (582209) on Monday January 03, 2011 @01:58PM (#34745400)
      I am not am not an expert here, but my understanding is Goldman-Sachs was the first bank to repay [cnn.com] TARP (a year and a half ago), and the govt. made 23% interest on it.
      • by Viewsonic (584922) on Monday January 03, 2011 @02:20PM (#34745642)

        People seem to leave this part out. They keep screaming about the 'bailouts' and tax payer money being 'wasted'. That money has been, for the most part, repaid, with interest. The 'taxpayers' have been making out like bandits with these 'bailouts' because they've decided they don't want the regulation that comes along with it. You take taxpayers money, you play by their rules. It's like people can't beyond the fact that these loans had some pretty heavy strings attached to them for the benefit of the taxpayers.

        • As much as we got back the money with interest from some companies, the amount of money we lost on AIG completely wipes it out. The 1.1 Billion that Goldman-Sachs payed back pales in comparison to the 50 billion of the 180 billion that they got out of the AIG bailout.

        • by celle (906675)

          "People seem to leave this part out. They keep screaming about the 'bailouts' and tax payer money being 'wasted'. That money has been, for the most part, repaid, with interest... "

          And how does that interest pay for all the damage done. These creeps aren't even being held accountable for the disaster they themselves caused. 23% interest on a few billion doesn't compare to the trillions in damages and the billions already given to the banks before tarp.

          rant
          Why haven't these assho

        • by Jah-Wren Ryel (80510) on Monday January 03, 2011 @04:28PM (#34747074)

          People seem to leave this part out. They keep screaming about the 'bailouts' and tax payer money being 'wasted'. That money has been, for the most part, repaid, with interest.

          Baloney. Of the $550B disbursed, only $230B has been returned [propublica.org] and that doesn't take into account the cost of money for the interim.

        • by David Jao (2759) <djao@dominia.org> on Monday January 03, 2011 @04:56PM (#34747366) Homepage

          People seem to leave this part out. They keep screaming about the 'bailouts' and tax payer money being 'wasted'. That money has been, for the most part, repaid, with interest. The 'taxpayers' have been making out like bandits with these 'bailouts' because they've decided they don't want the regulation that comes along with it. You take taxpayers money, you play by their rules. It's like people can't beyond the fact that these loans had some pretty heavy strings attached to them for the benefit of the taxpayers.

          If you count Goldman's AIG exposure, which any honest accountant must count, Goldman has not even come close to repaying the bailout money they received.

          Goldman would absolutely be bankrupt today ten times over had the government not bailed out AIG. The government's bailout of AIG was in effect a proxy bailout of Goldman. Until AIG repays every cent they received with interest, Goldman is not off the hook.

          It is, however, more than a little upsetting that cheerleaders like you so blindly accept Goldman's offloading of their liabilities onto AIG and then try to say with a straight face that Goldman has repaid their debt to the taxpayer.

      • I am not am not an expert here, but my understanding is Goldman-Sachs was the first bank to repay TARP (a year and a half ago), and the govt. made 23% interest on it.

        I'm not sure why that's really relevant. The assistance the government provided was worth far more than 23% interest. And the SEC let them off with practically no penalty for scamming their clients (maybe that's a bit harsh, but then again, the way they sold investment vehicles that they had a financial stake in seeing fail seems like a major

    • by westlake (615356)

      So our 12 billion in bailout money goes to invest a company that maybe makes a few million dollars of profit on at a least half a billion dollars in revenue.

      Goldman Sachs doesn't owe the government a dime:

      In June 2009, Goldman Sachs repaid the U.S. Treasury's TARP investment, with 23% interest (in the form of $318 million in preferred dividend payments and $1.418 billion in warrant redemptions). Goldman Sachs [wikipedia.org]

      The 23% return in interest on a loan of $10 billion is not half-bad.

      In 2010 Goldman Sachs stage-ma

  • ..and I didn't RTFA, but doesn't it seem kind of messed up that mega-banks get to invest their profit (which comes from fractional reserve interest scheming) into a company, keeping the wealth amongst the uber-wealthy? I understand the they still have to pursue the private clients consent for the rest of the money, but have the days of traditional IPOs gone by the wayside in this age of predatory, high-frequency investing. If there is anything I have learned about Wall Street, its that it serves its own pri
    • by SnapShot (171582)
      Your armchair punditry is completely on target. Can you imagine the outcry if congress passed a bill to invest in Facebook? But, pass through $12.9B [globaleconomiccrisis.com] from AIG to Goldman Sachs so they can invest in Facebook... that's okay. This is just an awful idea: the company that owns congress is investing in the company that knows everything about you.
    • by nedlohs (1335013)

      What does any of that have to do with an investment bank investing capital in a company?

      It is after all the definition of what they do every day.

      And yes, they are trying to make a buck and acting in their own private interest - that's how capitalism is supposed to work.

    • by u38cg (607297)
      A useful tip is that if someone starts talking to me about fractional reserve banking and how evil it is, I make polite noises and move away quietly. Most intelligent people with a basic grasp of economics will do likewise.
  • by eldavojohn (898314) * <eldavojohn.gmail@com> on Monday January 03, 2011 @01:40PM (#34745216) Journal
    The reasons this is a great move are pretty obvious but there's some articles floating around out there that point out this might be a gamble. Reasons include [businessinsider.com]:

    • We have no real idea if Facebook revenues are actually near $2 billion. The company is private and doesn't have to report numbers to anyone.
    • Groupon and its clones buy lots of Facebook ads, and we don't know if group-buying is a sustainable advertising model. Some local merchants say it kills their margins.
    • Zynga and the other social game companies are desperate to find a way to live off Facebook. Google is supposedly building an alternative.

    Regardless, it sounds like more of these privately traded shares in auctions from Sharespost will be conducted in the near future. Expect to see Facebook get a serious cash infusion if they all go as well as this one.

    • by Animats (122034)

      We have no real idea if Facebook revenues are actually near $2 billion.

      Correct. But Goldman does know. They will have had access to Facebooks' books before doing a deal like that.

    • by Peeteriz (821290)

      The rest of the market has a very vague idea about Facebook financial numbers, as they are not public - however, you'd bet that Goldman's lawyers and financial analysts have now spent much time looking at their numbers, and they are betting with their bonuses that some 10% of Facebook will be worth $450 million.

  • by Daniel Dvorkin (106857) * on Monday January 03, 2011 @01:44PM (#34745254) Homepage Journal

    Tulip bulbs, I tried to tell them. Tulip bulbs! That's the future of finance, right there!

    • by D Ninja (825055)

      Ah...but you seem to be forgetting that the South Seas is where the investments are at! Never mind that we don't have a business plan...it's the south. And it's the seas. It must be worth something!

  • So we will have new sequel "The Social Network: Goldman Sachs years"?

    Diaspora, where are you?

  • by digitaldc (879047) * on Monday January 03, 2011 @01:52PM (#34745334)
    I was so worried about facebook running out of money. Thank GOD that Goldman Sachs intervened and saved them from financial ruin.
  • by McNihil (612243) on Monday January 03, 2011 @01:56PM (#34745372)

    Somehow that does not seem right in any shape way or form. I know at least a handful users that have way more than a couple of accounts (pets, hiders and other stuff.)

    Maybe 25 cents/user on a good day but $100?!? Completely incredulous. But then again maybe Goldman sees the US dollar tanking worse than Titanic in the near future.

    • by Abstrackt (609015)
      Ongoing access to the data of each user neatly categorized into groups based on gender, interests, age, religion, relationship status, and purchasing history is probably worth about $100 a pop.
    • by vlm (69642) on Monday January 03, 2011 @02:14PM (#34745586)

      Somehow that does not seem right in any shape way or form. I know at least a handful users that have way more than a couple of accounts (pets, hiders and other stuff.)

      Maybe 25 cents/user on a good day but $100?!?

      Take all your physical paper junk mail and toss it into MULTIPLE trash bags for about a year. Make an intelligent estimate on paper, printing, and postage costs and multiply by the number of envelopes / catalogs / postcards / phone books. I was easily exceeding $1000/yr a couple years ago.

      Realize that my yearly junk mail is a yearly cost for an entire industry, that shows up on the P+L and cash flow statements not the balance sheet. On the other hand you're talking about ownership of a future advertising industry merely being $100 per victim. Frankly, $100 ownership cost per victim is cheap.

      Compare to the cost of buying the SuperBowel in order to sell millions per minute TV commercials.

      Another fun cost comparison is a realistic estimate of the sum of all local TV stations, at least a hundred million industry wide total to reach a million or so viewers, not so far out of line.

      Advertising is big business.

  • by blind biker (1066130) on Monday January 03, 2011 @02:00PM (#34745410) Journal

    Now that Goldman Sachs has invested all this taxpayers' money into Facebook, is Facebook suddenly too big to fail? *shudders*

    • by tukang (1209392)

      What taxpayer money? They repaid their bailout (as have most financial institutions) a long time ago with interest.

      I remember when the TARP was being discussed a lot of people would discuss what $700 billion could buy. Oh think about the number of schools, teachers, policemen firemen, or homeless people this money could go to. What those people failed to realize is that TARP was a loan, 90% of which has been repaid with interest.

  • Remember the good ol' days when "investing" actually meant "putting money in one basket to build a bigger company, to produce better products cheaper, to create more jobs"?

    This is investment for the sake of investment. This neither generates jobs nor does it do anything else of value to ... well, anyone but the investors and the invested.

    And when (not if, as soon as this bubble pops, too, we'll be bled dry for bailouts again.

    • by tukang (1209392)

      Remember the good ol' days when "investing" actually meant "putting money in one basket to build a bigger company, to produce better products cheaper, to create more jobs"?

      FB intends to use this money to hire more developers and build out their infrastructure. How does this not fall under "creating jobs" or "building a bigger company" or "building a better product"?

  • ... Goldman's behavior during the recent mortgage-backed securities fiasco, I'd say its time to short Facebook. If that were possible with a pre-IPO company.

    When someone advertises their purchase of a chunk of a companies equity and then goes looking for investors to "go in along side them", its too late. The news of their purchase has just driven the price up. If they were looking after their clients' interests, they'd have rounded up partners before going public. What they're probably looking for is sucke

  • by Fractal Dice (696349) on Monday January 03, 2011 @02:18PM (#34745622) Journal
    A 1% stake looks an awful lot like an attempt to manufacture a good old fashioned dotcom bubble - take a website, slap a price tag on it to create the illusion of value, sell it the masses in an IPO in a little while and get out before people actually analyze the balance sheet. Is there a legitimate business need for this investment money? If they are a profitable company, can't they just use the profits? (or if the IPO is the goal, just show the balance sheet and it should speak for itself). If they are not profitable by this point, then what value is there in the business?
  • by XxtraLarGe (551297) on Monday January 03, 2011 @02:29PM (#34745746) Journal

    "And does the Goldman-Sachs give him a good price?"

    "Of course not, they are the Goldman Sachs, they make their living ripping off the American people [youtube.com]."

  • by miller60 (554835) on Monday January 03, 2011 @03:05PM (#34746122) Homepage
    The $450 million number from Goldman is interesting because Facebook just announced plans to invest $450 million over the next 5 years in a huge new data center [datacenterknowledge.com] in North Carolina. Facebook's already spending about $50 million a year [datacenterknowledge.com] on leased data center space, and expects to spend about $200 million building its new Oregon server farm. It takes a lot of infrastructure and servers to support 500 million users.
  • When GS can get the treasury to print it up for them. It's going to be interesting to see what happens when the creeping horror known as GS gets it hands on so much personal info. They could also take the LBO approach of "strip it and milk it" by forcing Facebook to ruthlessly cutting costs, which translates into worse service and security, and maximizing revenue which translates to opening the flood gates to greater sale of info and more ads.

  • This is such a bad idea to throw more money towards an over inflated bubble. All I want to know is if I (as an average investor) can somehow bet against it? That way when the bubble bursts and goes down in flames, I can make some money.

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