Goldman’s critics have long complained that the firm puts its own interests ahead of clients. In the Facebook deal, Goldman is investing $450 million, at an implied $50 billion valuation. However, Goldman clients are paying a 4 percent placement fee and a 0.5 percent expense reserve fee for their shares, as well as giving up 5 percent of gains. That means Facebook would need to be worth closer to... [more]
Goldman’s critics have long complained that the firm puts its own interests ahead of clients. In the Facebook deal, Goldman is investing $450 million, at an implied $50 billion valuation. However, Goldman clients are paying a 4 percent placement fee and a 0.5 percent expense reserve fee for their shares, as well as giving up 5 percent of gains. That means Facebook would need to be worth closer to $60 billion before they make any money.
Beside those fees, Goldman is likely to earn additional money from ancillary business — with the biggest victory coming from an eventual initial public offering, perhaps as soon as 2012.
Given all that, Goldman could still make money even if Facebook’s value drops to $40 billion, according to analysts’ estimates.
http://dealbook.nytimes.com/2011/01/06/goldman-unit-passed-on-earlier-facebook-investment/?ref=business[less]
Response by malthus
over 15 years ago
Posts: 1333
Member since: Feb 2009
Do you have any friends with whom you could discuss your non real estate obsessions?
Ignored comment.
Unhide
Response by alanhart
over 15 years ago
Posts: 12397
Member since: Feb 2007
Seriously! Maybe RS can get together for coffee with all its other usernames and discuss it. There's a particularly large Starbucks at Cooper Square.
Ignored comment.
Unhide
Response by jas
over 15 years ago
Posts: 172
Member since: Aug 2009
I looked at this offering for a client. It was insulting. That said, the deal is over-subscribed. Same stuff, different decade.
Ignored comment.
Unhide
Response by Riversider
over 15 years ago
Posts: 13573
Member since: Apr 2009
Goldman reserves the right to get out of their Facebook position without letting them know. The conflicts involved in this are many.
Ignored comment.
Unhide
Response by Goldie
over 15 years ago
Posts: 182
Member since: Apr 2007
The disclosure indicating they may sell their position (to other investors) was probably made to protect themselves from stupid investors who didn't realize that ACTING AS AN INTERMEDIARY IS A BIG PART OF WHAT THEIR BUSINESS IS.
It's comical to see someone like Riversider call this a conflict of interest.
And Jas, you are right, the terms were unbelievable. Custody fees, placement fees, performance fees. But if they can get it done, more power to them.
Ignored comment.
Unhide
Response by Truth
over 15 years ago
Posts: 5641
Member since: Dec 2009
Goldie: O.K. But stupid investors are what made that world go 'round.
Ignored comment.
Unhide
Response by Riversider
over 15 years ago
Posts: 13573
Member since: Apr 2009
What's embarrassing is that another fund at Goldman who had the obligation of acting as "fiduciary" turned down Facebook. They then went about and sold it via a different fund to different investors where it only had to meeting the "suitable" standard. Basically what they are telling these new clients is that Goldman and these investors may not have aligned interests, which brings up ABACUS of course. I don't believe Facebook will become another ABACUS, but the documents and disclosures really show the conflicts. Also what are these investors thinking? Facebook has to go up 20% before they break even.
Ignored comment.
Unhide
Response by Goldie
over 15 years ago
Posts: 182
Member since: Apr 2007
What should be more embarrassing are your posts, dude. Maybe the other fund didn't invest for reasons other than value. Maybe it didn't fit their risk profile, maybe it wasn't in their area of expertise, maybe they allocated resources elsewhere and didn't spend the time on due diligence, maybe they would have been brought inside a chinese wall due to Goldman's inside info, who knows? There are thousands of non-value reasons why a fund would rightly choose to not make an investment.
Do you have any friends with whom you could discuss your non real estate obsessions?
Seriously! Maybe RS can get together for coffee with all its other usernames and discuss it. There's a particularly large Starbucks at Cooper Square.
I looked at this offering for a client. It was insulting. That said, the deal is over-subscribed. Same stuff, different decade.
Goldman reserves the right to get out of their Facebook position without letting them know. The conflicts involved in this are many.
The disclosure indicating they may sell their position (to other investors) was probably made to protect themselves from stupid investors who didn't realize that ACTING AS AN INTERMEDIARY IS A BIG PART OF WHAT THEIR BUSINESS IS.
It's comical to see someone like Riversider call this a conflict of interest.
And Jas, you are right, the terms were unbelievable. Custody fees, placement fees, performance fees. But if they can get it done, more power to them.
Goldie: O.K. But stupid investors are what made that world go 'round.
What's embarrassing is that another fund at Goldman who had the obligation of acting as "fiduciary" turned down Facebook. They then went about and sold it via a different fund to different investors where it only had to meeting the "suitable" standard. Basically what they are telling these new clients is that Goldman and these investors may not have aligned interests, which brings up ABACUS of course. I don't believe Facebook will become another ABACUS, but the documents and disclosures really show the conflicts. Also what are these investors thinking? Facebook has to go up 20% before they break even.
What should be more embarrassing are your posts, dude. Maybe the other fund didn't invest for reasons other than value. Maybe it didn't fit their risk profile, maybe it wasn't in their area of expertise, maybe they allocated resources elsewhere and didn't spend the time on due diligence, maybe they would have been brought inside a chinese wall due to Goldman's inside info, who knows? There are thousands of non-value reasons why a fund would rightly choose to not make an investment.
http://dealbook.nytimes.com/2011/01/06/why-did-a-goldman-unit-pass-on-facebook/
Goldman Sachs Capital Partners passed on Facebook saying it was "inappropriate" for its clients. It was probably based on valuation.