Photo:Chris Honros/Getty ImagesInvestment bank forced to withdraw plans for its US investors to participate in private placement of shares in the social networking site
Goldman Sachs has been left red-faced after the investment bank had to scrap plans for its super-rich American clients to become special friends with Facebook.
Earlier this month, Goldman Sachs invested $450m (£283m) in the social network company at a price that valued Facebook at $50bn. It was then reported that the bank was looking to raise $1.5bn for Facebook through an exclusive share offer, known as a private placement, for the bank's top clients.
Facebook is probably the hottest property on the planet at present. The seven-year-old company has more than 500 million users and recently passed Google as the most visited site on the web. The deal was a major coup for Goldman, which appeared to have found a way to get its clients in first.
The bank planned to set up a "special purpose vehicle" to allow its clients to invest in Facebook. The plan was widely seen as a way to circumnavigate rules that restrict to below 500 the number of US shareholders a private company can have. It subsequently transpired that Facebook was planning to address the 500 rule itself by going public or publishing full accounts.
While Goldman never commented on the private placement, the bank's officials believe the "intense media attention" that the deal generated around the world was threatening to scupper the deal in the US.
American law prohibits "general solicitation and advertising" in private offerings, banning banks from promoting an offer by taking out advertisements or communicating with media outlets.
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