According to Wall Street Journal columnist Dennis K. Berman, Goldman Sachs is pulling its U.S. investors from the Facebook deal. Berman, who tweeted the breaking news this morning, added, “What a black eye for Lloyd & Co.” The SEC had been looking into Goldman’s decision to employ the rarely used “special purpose vehicle” to let its private clients pool their money to invest in the $1.5 billion Goldman set aside as one, circumventing SEC rules that limit the number of investors in private companies to 500. As Tyler Durden at Zero Hedge quipped, “Does this mean that not even Goldman is allowed to come up with innovative financial ‘schemes’ any more?” In a statement to the Journal, Goldman denied that the SEC was behind the decision, saying limiting the offering to “offshore” investors wasn’t “required or requested by any other party,” including the Securities and Exchange Commission. Goldman said it was motivated by “intense media attention” around the $1.5 billion, which it raised in just five days, adding that it “concluded the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law.”
Goldman’s deal with Facebook was supposed to be the start of a beautiful friendship with the tech world. Goldman could either rake in the fees as the lead book-runner on Facebook’s 2012 IPO or fees from selling shares while the company was still private — a lucrative position either way as investors hyperventilated over Goldman’s decision to invest $450 million at a $15 billion valuation. Hot off the Facebook deal, on Friday CEO Lloyd Blankfein paid a visit to Groupon to try to wrestle their IPO away from Morgan Stanley. But this reversal, especially after investors were already promised a piece, could slow down the momentum for everybody’s favorite market manipulator. Oh no, does this mean no more Mr. Smiley?