Outrage: Americans Blocked from Buying Facebook Stock

Goldman Sachs on Monday scrapped an offer to its wealthy clients in the US to participate in a $1.5 billion investment in Facebook, reports FT.

The offer will still be open to investors elsewhere but GS said that the high level of publicity around the plan threatened to breach US securities laws, which are designed to limit the publicity around forthcoming share sales.

There you have it, folks. U.S. securities regulations as enforced by the SEC can't stop an obvious Ponzi scheme like Bernie Madoff, or a West Coast facsimile, but they are sure good at dissuading investment bankers from offering an investment in what is likely to be one hot deal.

I further note that the only reason GS was offering Facebook in the U.S.in the first place to only wealthy clients is because of even more SEC regulations that prevent the "little people" from these kinds of deals.


I have no idea if Facebook will turn out to be a wise investment or not, but anyone who thinks that the securities industry is unregulated in the United States should understand what is going on with the Facebook deal.

And I remind you this is Facebook, a very powerful company, whose deal is being handled by Goldman Sachs. For a small unconnected firm to raise money in this day and age it  is near impossible because of the regulations. Thanks to the SEC the public markets are, for all practical purposes, shut off for small firms, unless they are one of the select view that have been blessed by backing from  Silicon Valley venture capital firms, who have stock at very cheap prices and have the powerhouse attorneys that can get a deal through the SEC maze.

The rest of small business America is screwed.

UPDATE: Here is the Goldman Sachs satement on its plans to exclude U.S. investors from its Facebook private placement:

Goldman Sachs originally intended to conduct a private placement in the U.S. and offshore to investors interested in Facebook. The transaction generated intense media attention. In light of this intense media coverage, Goldman Sachs decided to proceed only with the offer to investors outside the U.S.

Goldman Sachs concluded the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law. The decision not to proceed was based on the sole judgement of Goldman Sachs and was not required or requested by any other party.

Goldman Sachs regrets the consequences of this decision, but we believe this is the most prudent path to take.

Got that? GS fears they may step on SEC regulations that limit news coverage on a deal. News coverage that is providing scrutiny of the deal from a multitude of angles. This is what the SEC prohibits. I tell you, it really is  time to close the SEC down and save the taxpayers some money.