Monday 17 January 2011
Goldman Sachs has banned US investors from buying shares in Facebook as it prepares to sell a stake in the social network website, blaming the level of media attention the deal had generated.
6:59PM GMT
In a brief statement on Monday, the US investment bank said its decision had been taken in light of the "intense media coverage". However, the sale, which is valued at up to $1.5bn (£945m), would see the shares still being offered to clients outside of the US.
"Goldman Sachs concluded that the level of media attention might not be consistent with the proper completion of a US private placement under US law," the bank said in a statement. "The decision not to proceed in the US was based on the sole judgement of Goldman Sachs and was not required or requested by any other party. We regret the consequences of this decision, but Goldman Sachs believes this is the most prudent path to take."
Many potential investors were already expecting to receive far fewer Facebook shares than they wanted because of the level of demand.
The bank began informing clients of its decision on Sunday evening, according to the Wall Street Journal, which said customers of the bank in Asia had been told first about the decision, followed by Europe and the US.
Earlier this month Goldman Sachs and Facebook announced the bank had bought a $450m stake in the business and had set up a special purpose vehicle to allow its clients to buy a further $1.5bn of the company's shares.
The deal got the attention of the US Securities and Exchange Commission, which said it would be examining the amount of disclosure required from private companies in light of the investment.
Goldman's decision to bar US customer orders in Facebook comes less than a week after the bank released a 67-page "Business Standards" report, which opened with the words "our clients' interests always come first".
The bank's reputation took a battering last year in the wake of the scandal surrounding its sale of complex credit products to clients that ended up losing several hundreds million dollars.
Under its 14 new "business principles" the bank pledged to do more to ensure that its clients were "at the heart of the firm's decision-making, thinking and committee governance, both formally and informally".
As part of these moves, Goldman Sachs said it had formed a new business standards committee to oversee proper decisions were made regarding the treatment of its clients, as well making sure that it was clearer with its customers in future over what the bank's specific responsibilities were in any deal.
Goldman's decision to bar US customer orders in Facebook comes less than a week after the bank released a 67-page "Business Standards" report, which opened with the words "our clients' interests always come first".
The bank's reputation took a battering last year in the wake of the scandal surrounding its sale of complex credit products to clients that ended up losing several hundreds million dollars.
Under its 14 new "business principles" the bank pledged to do more to ensure that its clients were "at the heart of the firm's decision-making, thinking and committee governance, both formally and informally".
As part of these moves, Goldman Sachs said it had formed a new business standards committee to oversee proper decisions were made regarding the treatment of its clients, as well making sure that it was clearer with its customers in future over what the bank's specific responsibilities were in any deal.
