Monday, January 03, 2011

So our old pals at Goldman invest in Facebook and give it a private value of $50BN (nytimes).  This effectively lets them resell ownership creating an unregulated Facebook-only hedge fund, as described here

"...The capital injection that so duly empowers Facebook is basically an uncapitalized bonus pool for Goldman Sachs. You see, it is highly unlikely that Goldman is actually materially investing in Facebook, particularly at these valuations (is facebook really worth more than Time Warner and eBay, after the private market liquidity discount?). What Goldman is doing is employing its financial engineers to allow its HNW investors to sidestep and circumvent the laws of the land as feebly enforced by the SEC."

Remember back when a company would have to do an IPO before a market was made?  Why should Goldman have to deal with the swarthy, common 'P' in IPO, not to mention the already lax and over-permissive SEC and their trifling rules, when a mint can be made with a private, unregulated market?  We'll see what happens when and if the $50BN valuation turns up to be a bubble in disguise, and the repercussions hit so far and wide that Goldman's private dealings start to affect the overall market - AGAIN.  Just goes to show that Goldman can do whatever it wants, whenever it wants, with no benefit to anyone else, as long as they're lining their own pockets.  When the house of cards falls, you and I will pay for their games out of our own 401Ks. 

Nothing changes on Wall Street.