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Goldman Invests $450m In Facebook

CmdrTaco posted more than 3 years ago | from the super-poke-me dept.

228

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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228 comments

Can't resist ... (4, Insightful)

johnhennessy (94737) | more than 3 years ago | (#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 (5, Interesting)

MoonBuggy (611105) | more than 3 years ago | (#34745148)

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?

Re:Demographic Data (5, Insightful)

durrr (1316311) | more than 3 years ago | (#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 (0)

Anonymous Coward | more than 3 years ago | (#34746142)

"As long as the music is playing, you've got to get up and dance"

Does this sound like someone who really wants to keep dancing?

I point out that it was said before the financial crisis.

Re:Demographic Data (4, Interesting)

div_2n (525075) | more than 3 years ago | (#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.

Re:Demographic Data (5, Insightful)

MoonBuggy (611105) | more than 3 years ago | (#34745360)

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.

Re:Demographic Data (0)

Anonymous Coward | more than 3 years ago | (#34745658)

It doesn't have to be true to be profitable; spammers seem able to fool enough people enough of the time.

Re:Demographic Data (1)

wwfarch (1451799) | more than 3 years ago | (#34745754)

Google does allow you to quantitatively assess the impact. You can pretty easily tell when someone came to your site through a Google ad and what they did while they were there. I'm sure many people don't assess the data in any meaningful matter but Google does make that data available to use.

Re:Demographic Data (4, Informative)

Low Ranked Craig (1327799) | more than 3 years ago | (#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 (0)

Anonymous Coward | more than 3 years ago | (#34746072)

No one modded this?

The law wasn't done purely for Golden Sacsuckers, but after reading this, I can't help but totally agree that this was done to attempt to "purify" demographic information online for corporate use.

Re:Demographic Data (1)

Anonymous Coward | more than 3 years ago | (#34745800)

If we assume that Facebook peaks at half the world's population (3500 million) and maintains that user base for 5 years, then those $50 billion can be distributed as about $3 per user year.

Do you think that the Facebook database could be used to make the average Facebook user increase their consumption of real stuff by significantly more than $3 per year? I do.

If we run the same calculation with only 500 million users and 5 years we get about 20 dollars per user year. That still sounds like fair deal to me.

We are probably in the very early stages of a targeted advertisement bubble. Goldman Sachs has plenty of time to cash in and get out.

Re:Demographic Data (1)

root_42 (103434) | more than 3 years ago | (#34746266)

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.

Re:Demographic Data (1)

tukang (1209392) | more than 3 years ago | (#34746278)

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 (4, Interesting)

al0ha (1262684) | more than 3 years ago | (#34746286)

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.

Re:Can't resist ... (1)

strength_of_10_men (967050) | more than 3 years ago | (#34745166)

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?

Re:Can't resist ... (2)

Skreems (598317) | more than 3 years ago | (#34745178)

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 quarterly stock purchase.

Re:Can't resist ... (1)

johnhennessy (94737) | more than 3 years ago | (#34745232)

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 ! :)

Re:Can't resist ... (1)

Opportunist (166417) | more than 3 years ago | (#34745512)

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 X of Y for that instead"), how much easier does it get to imagine it when you know that you could "buy" 50 World Trade Centers for that?

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

Re:Can't resist ... (2)

vlm (69642) | more than 3 years ago | (#34745720)

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 much Facebook is worth.

Today, the "value" is what some people think it would be worth. Whether that has any reflection in reality is secondary.

I would say that a closed transaction is the best, most realistic technology for finding value ever invented... Dice aren't going to work.

how much easier does it get to imagine it when you know that you could "buy" 50 World Trade Centers for that?

Its gets a lot easier to imagine if you think of it as, apparently in their opinion, if you have $50B laying around, the best thing to do with it at that moment is buy a Facebook. Rather than Government Motors or a huge pile of rice or whatever.

Re:Can't resist ... (2)

KarrdeSW (996917) | more than 3 years ago | (#34746134)

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.

Re:Can't resist ... (0)

Anonymous Coward | more than 3 years ago | (#34746230)

This site is rife with arrogant prick douche bag answers like this, where someone posts something reasonable, yet perhaps incorrect, and a douche bag know it all like vlm has to reply with a dickhead insulting response to each part, like he fucking knows anything.

The meaner someone is online, the bigger a pussy fucking bitch they are in real life.

Re:Can't resist ... (1)

longacre (1090157) | more than 3 years ago | (#34746084)

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.

Re:Can't resist ... (2)

phantomfive (622387) | more than 3 years ago | (#34745318)

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.

Re:Can't resist ... (1)

Tr3vin (1220548) | more than 3 years ago | (#34745402)

But then I've been wrong before.

Well, so has Goldman.

Re:Can't resist ... (2)

Nadaka (224565) | more than 3 years ago | (#34745528)

They were right. It turns out that throwing the worlds economy into chaos and recession is fantastically profitable. Especially so when you can convince the government to cover your losses with the tax money that you avoided paying thanks to low capital gains taxes and loopholes engineered by high priced tax attorneys.

Re:Can't resist ... (1)

phantomfive (622387) | more than 3 years ago | (#34745436)

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.......

Re:Can't resist ... (1)

ThePangolino (1756190) | more than 3 years ago | (#34745438)

The 450 million deal may have something to do with this:

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.

Re:Can't resist ... (1)

Anonymous Coward | more than 3 years ago | (#34745474)

Hot DAMN but I can't wait for this little bubble to burst!

Watching Zucker become obselete would have been delightful by itself, but to see Zucker and Goldman BOTH end up taking a wash? The schadenfreude... it will be too delicious...

Re:Can't resist ... (1)

ShanghaiBill (739463) | more than 3 years ago | (#34745524)

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?

Re:Can't resist ... (1)

I8TheWorm (645702) | more than 3 years ago | (#34745670)

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.

Re:Can't resist ... (1)

Anonymous Coward | more than 3 years ago | (#34745952)

According to http://techcrunch.com/2011/01/02/facebook-50-billion/ it is because facebook doesn't want to go public but does want venture funding.

If they keep issuing shares to investors, the SEC will go after them for having too many shareholders and not disclosing internal information required by "public" companies.

If facebook issues shares to Goldman and Goldman acts as 1 shareholder that allows others to invest in their share, lawyers may argue that there isn't a need to disclose operational information because FB hasn't exceeded that threshold.

Or something.

Re:Can't resist ... (1)

Dan667 (564390) | more than 3 years ago | (#34746284)

rupert murdoch bought myspace. A lot of these people don't know what they are doing with regards to the internet.

Fools and their money.. (2)

sstamps (39313) | more than 3 years ago | (#34745118)

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

Fools and their privacy..

Re:Fools and their money.. (5, Insightful)

Seumas (6865) | more than 3 years ago | (#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!

Re:Fools and their money.. (2)

blind biker (1066130) | more than 3 years ago | (#34745230)

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$.

Re:Fools and their money.. (2)

flaming error (1041742) | more than 3 years ago | (#34745328)

> 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?

Re:Fools and their money.. (2)

brainboyz (114458) | more than 3 years ago | (#34745434)

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.

Re:Fools and their money.. (0)

Anonymous Coward | more than 3 years ago | (#34745620)

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

It's a choice when you vote. (Sometimes you have to write in, though.)

The bail out decision was something that wasn't merely controversial, but absolutely absurd and no good-faith politician would have supported it. If people voted for even reasonably-good candidates, it wouldn't have happened. It's not even a left/right thing. If enough people vote against corruption, this won't happen anymore.

Re:Fools and their money.. (1)

flaming error (1041742) | more than 3 years ago | (#34746092)

> If enough people vote against corruption

Everybody votes against corruption. Everybody also votes against terrorists, pedophiles, and puppy mills. But they all happen anyway.

The root problem isn't corruption, it's power. Voters have decided that government should be responsible for all our problems, and have gradually allowed government commensurate power over our lives.

Now our votes change nothing. And, naturally, the power we've ceded often corrupts the empowered.

Re:Fools and their money.. (3, Insightful)

Viewsonic (584922) | more than 3 years ago | (#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.

Re:Fools and their money.. (1)

troll -1 (956834) | more than 3 years ago | (#34746280)

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 against investors and the free market while at the same time lapping up the abundance of its products.

Facebook Sucks! (-1)

Anonymous Coward | more than 3 years ago | (#34745126)

Facebook Sucks!

Book value vs. Real Value (2)

teknopurge (199509) | more than 3 years ago | (#34745132)

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.

Re:Book value vs. Real Value (0)

Anonymous Coward | more than 3 years ago | (#34745412)

More like railroads, cars, the web...

The bubble always bursts. There is always competition in a free market. Facebook will soon be just one of many social networking companies.

BTW my Mom joined Facebook before I did. I was considering joining now that they seem to understand what the users want in terms of controls, but seriously? Mom? Call me immature, but that does it for me. ;-)

Re:Book value vs. Real Value (1)

teknopurge (199509) | more than 3 years ago | (#34745644)

exactly - the only difference between FaceBook and MySpace(for all intents and purposes) is the timing.

Re:Book value vs. Real Value (0)

Anonymous Coward | more than 3 years ago | (#34746044)

Look at it this way:

Facebook has revenue, quite a lot of it.

Facebook has a pretty small staff.

Facebook drives that revenue with a pretty tiny infrastructure relative to say amazon or google.

Facebook behaves like a semi-open platform -- they allow companies like zynga to also generate revenue using the FB platform.

They have lots of users and lots and lots of valuable data that can't be gotten anywhere else.

So, are they worth 50billion? I don't know, but they are actually doing something right, vs say groupon.

Re:Book value vs. Real Value (1)

LordNacho (1909280) | more than 3 years ago | (#34745486)

Overrated athletic teams' performance isn't dependent on how much people have bet on them winning. FB's valuation benefits from GS betting on them.

I'd have to agree, I don't see how it's worth so much. But that doesn't mean I'd have to balls to bet against GS.

Re:Book value vs. Real Value (1)

Esteanil (710082) | more than 3 years ago | (#34745984)

"Markets can remain irrational a lot longer than you and I can remain solvent" - A. Garry Shilling

Goldman Sachs .... Facebook .... Wall Street ... (5, Funny)

unity100 (970058) | more than 3 years ago | (#34745140)

What could POSSIBLY go wrong ...

Re:Goldman Sachs .... Facebook .... Wall Street .. (0)

Anonymous Coward | more than 3 years ago | (#34745440)

http://en.wikipedia.org/wiki/Dot-com_bubble

Did I just get trolled?

Re:Goldman Sachs .... Facebook .... Wall Street .. (0)

Anonymous Coward | more than 3 years ago | (#34745572)

Well, they control how we connect on the internet, our government's funds, the private sector's funds, the new media in general - I don't think anything can possibly go wrong, seeing how they define "wrong" as they see fit.

12 billion bailout (3, Insightful)

fermion (181285) | more than 3 years ago | (#34745144)

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?

Re:12 billion bailout (4, Informative)

timeOday (582209) | more than 3 years ago | (#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.

Re:12 billion bailout (1)

LordNacho (1909280) | more than 3 years ago | (#34745558)

That's right, but you can't say it's a great deal for everyone (taxpayers) just because GS didn't go bust and managed to repay their loan. There was a chance they were gonna go down. If the government keeps giving them money to bet with, they'll roll snakeeyes someday.

Re:12 billion bailout (3, Insightful)

Viewsonic (584922) | more than 3 years ago | (#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.

Re:12 billion bailout (1)

Actually, I do RTFA (1058596) | more than 3 years ago | (#34746158)

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 majorconflict of interest. Maybe someone can explain why it was okay?).

Add to that the fact that the top 5 banks have gotten bigger, instead of shrinking them away from being too-big-to-fail.

I'd rather see long-term regulation than 23% interest, because all this set up was the probability that it happen again. After all, why not risk the company if the government will finance one more bet. And what are the odds two bets fail in a row?

Re:12 billion bailout (1)

westlake (615356) | more than 3 years ago | (#34745740)

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-managed $554.5 billion dollars worth of mergers and acquisitions. Goldman Sachs Returned to M&A Top Spot in 2010 [go.com]

I know this isn't new... (1)

cosm (1072588) | more than 3 years ago | (#34745212)

..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 private interest, and not the commonwealths.

Whether or not this is ultimately beneficial to main-street is definitely debatable, but my money is on an exponentially larger gap between the distribution of wealth between the middle class and the upper elite.

I'm all for keeping the money you as an individual earn, but it seems that as corporations get more and more of the ups of personified status (defamation rights, etc.), without also incurring the negatives (murder, genocide), we all get screwed by the plutocracy ad infinitum. Or is my armchair punditry completely off-base?

Re:I know this isn't new... (1)

trickyD1ck (1313117) | more than 3 years ago | (#34745330)

..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?

As opposed to what? Not investing? Not earning profits?

Re:I know this isn't new... (1)

SnapShot (171582) | more than 3 years ago | (#34745444)

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.

Re:I know this isn't new... (1)

nedlohs (1335013) | more than 3 years ago | (#34745520)

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.

Reasons Why This Might Be a Bad Move (4, Interesting)

eldavojohn (898314) | more than 3 years ago | (#34745216)

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.

Re:Reasons Why This Might Be a Bad Move (2)

Animats (122034) | more than 3 years ago | (#34745416)

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.

Re:Reasons Why This Might Be a Bad Move (1)

Peeteriz (821290) | more than 3 years ago | (#34745468)

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.

Man, they never listen to me (5, Funny)

Daniel Dvorkin (106857) | more than 3 years ago | (#34745254)

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

Re:Man, they never listen to me (2)

D Ninja (825055) | more than 3 years ago | (#34745766)

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!

The Social Network: Goldman Sachs years (1)

Pecisk (688001) | more than 3 years ago | (#34745286)

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

Diaspora, where are you?

White Hat? (0)

Anonymous Coward | more than 3 years ago | (#34745312)

Can you really remain a white hat while involved in FaceBook's business practices? When you have the white hat, everything is above the table. FaceBook has many below the table items. You can't take off the hat either, as otherwise your hat gets stain marks, and your reputation is hurt.

Everybody into the Pool!!! (1)

Anonymous Coward | more than 3 years ago | (#34745320)

This whole thing reminds of Bernie Madoff back in the day. Everybody was complaining about how the little guy couldn't get the huge hedge fund profits. People at high-end parties didn't feel like they were "somebody" unless they were in the fund.

How'd that work out for them?

What a relief! (4, Funny)

digitaldc (879047) | more than 3 years ago | (#34745334)

I was so worried about facebook running out of money. Thank GOD that Goldman Sachs intervened and saved them from financial ruin.

I want in (1)

Eggbloke (1698408) | more than 3 years ago | (#34745344)

Can I invest £50 and then get £1.50 from it? I think I have found a way to create infinite money!

Seriously though is there anything stopping me from doing this? Facebook doesn't look like it's going to fail anytime soon...

Re:I want in (2)

ColdWetDog (752185) | more than 3 years ago | (#34745566)

Can I invest £50 and then get £1.50 from it? I think I have found a way to create infinite money!

Seriously though is there anything stopping me from doing this? Facebook doesn't look like it's going to fail anytime soon...

If you already have money, it's easy to make more money. Especially if you have lots and lots of money - so much money that if you lose money, everybody else gets worried and gives you more money.

The hard part is getting a lot of money in the first place, the rest is so easy even a banker can do it.

So each user is worth about $100? (2)

McNihil (612243) | more than 3 years ago | (#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.

Re:So each user is worth about $100? (1)

Abstrackt (609015) | more than 3 years ago | (#34745466)

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.

Re:So each user is worth about $100? (5, Insightful)

vlm (69642) | more than 3 years ago | (#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.

Now that GS invested 1/2 billion into Facebook.... (3, Insightful)

blind biker (1066130) | more than 3 years ago | (#34745410)

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

Re:Now that GS invested 1/2 billion into Facebook. (2)

tukang (1209392) | more than 3 years ago | (#34746222)

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.

And this is what's wrong with "investing" today (1)

Opportunist (166417) | more than 3 years ago | (#34745556)

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.

Re:And this is what's wrong with "investing" today (2)

tukang (1209392) | more than 3 years ago | (#34746172)

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"?

Based on .... (1)

PPH (736903) | more than 3 years ago | (#34745600)

... 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 suckers whose egos they can stroke by calling them "wealthy clients" who they can unload their holdings onto at the IPO.

This is why we need to reinstate something like Glass-Steagall. Or whatever it takes to separate brokerages, banks, investment banks, and private equity funds. Too many games are being played with publicity releases of investment schemes in pre-IPO companies.

Why do they need the money? (2)

Fractal Dice (696349) | more than 3 years ago | (#34745622)

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?

This will be a disaster.... (0)

Anonymous Coward | more than 3 years ago | (#34745656)

On New Years, someone was taking pictures. The person is a big time Facebook person. Everyone except me was giving her crap about putting those photos on FB. She said "I keep my profile private!"

Long story short, everyone else (none are IT people) chastised her about FB's lack of consideration for privacy, how they ignore those settings and how they pimp the data they collected.

Facebook's name is mud - even among non-IT people.

Goldman is going to lose! They needn't worry! Their bitches in Congress will give them more money.

The guy from house of the dead 2, right? (0)

Anonymous Coward | more than 3 years ago | (#34745732)

"Dogs of the AMS, this is GOLDMAN."

Just what we need (1)

Anonymous Coward | more than 3 years ago | (#34745784)

Yet another bubble. That's going to do wonders for the economy.

Facebook ain't worth jack (1)

Anonymous Coward | more than 3 years ago | (#34745820)

Unlike companies that provide a service that requires skill and/or technology (eg. Google), Facebook does not provide anything that some college kid couldn't whip together over a couple of weeks. It's basically just a big web-forum.

MySpace is the same way and look how fast the tide turned on them. It's because they don't actually do anything and rely on people deciding to use them instead of some other site. A competitor could pop up and Facebook could disappear overnight and nobody would care.

Very poor investment.

Pmp'n'dmp (0)

Anonymous Coward | more than 3 years ago | (#34745842)

Strange how few here seem to recognise this for what it is. But then Goldman have always been masters at obfuscating that modal switch.

$450 Million = One New Facebook Data Center (3, Informative)

miller60 (554835) | more than 3 years ago | (#34746122)

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.

Facebook... (0)

Anonymous Coward | more than 3 years ago | (#34746238)

...too big to fail.

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