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BREAKINGVIEWS - Goldman perceptions shape Facebook reality
-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --
By Richard Beales
NEW YORK (Reuters Breakingviews) - Perceptions about Goldman Sachs have shaped the reality of its Facebook fundraising. The Wall Street firm is now excluding U.S. investors from buying into the social network after media scrutiny made a private placement seem too public. Facebook invites attention -- but Goldman does too these days. For all its focus on clients, the firm still has a blind spot about its own public image.
Getting hired by Facebook for a $1.5 billion private placement was a coup for Goldman. But in hindsight, bankers took a chance on their ability to keep a lid on things. With Facebook easily the hottest Internet property and carrying a putative valuation of $50 billion, it was always likely that reporters would unearth details. And that danger was surely multiplied by the association with Goldman.
The firm used to be the investment banker's investment bank -- highly influential, but operating mostly under the radar. That started to change at the time of its IPO a little more than a decade ago, and attention rocketed during the financial crisis as Goldman and its alumni faced negative headlines and often failed to explain themselves successfully. That spawned conspiracy theories, mostly far-fetched. But the firm has become a regular media target.
Goldman would have been on safe ground with Facebook had there been no leaks and even, probably, if the placement documents had reached the public domain in full. As it was, bitty and inaccurate revelations meant some potential investors might not be getting a full picture -- and under U.S. private placement rules, Goldman couldn't pipe up to clarify. The decision not to sell the deal to U.S. investors was probably the right response.
This doesn't mean Facebook made a mistake by hiring Goldman. It looks as if Mark Zuckerberg's company will easily get all the investment dollars it wanted. But the episode suggests companies considering hiring Goldman -- especially those hoping to do deals that break new ground or test existing rules -- may need to weigh the firm's profile as a potential risk factor. Goldman, meanwhile, needs to realize it's no longer toiling away in the background. Recognizing that may help it one day regain a measure of obscurity.
-- Goldman Sachs, which was planning a $1.5 billion private placement of Facebook interests to U.S. and offshore investors, will now only proceed with the offer to investors outside the United States.
-- "The transaction generated intense media attention," Goldman said in a statement. "In light of this intense media coverage, Goldman Sachs has decided to proceed only with the offer to investors outside the U.S. Goldman Sachs concluded that the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law."
-- The firm said it regretted the consequences of the decision, but that it believed it to be the most prudent path to take.
(Editing by Jeffrey Goldfarb and Martin Langfield)
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