In a startling admission that they have “blown” their exemption under the federal securities laws, Facebook and Goldman Sachs are now pushing their private placement of some $1.5 billion in Facebook shares offshore.
This is an exceptional event but of course the offering itself is exceptional. The deal places an overall value of $50 billion on the company. The fact that the private placement received so much attention likely drew the scrutiny of the SEC although Goldman Sachs is denying that the deal is being changed under SEC pressure.
The problem most likely is that Goldman lawyers concluded either 1) the deal created too much publicity in the US and/or 2) it became clear that some of those who were likely to buy in the US would not be willing to abide by restrictions on resales. Now only non-US investors will be able to buy into the deal with the likely assurance that their holdings will only trade offshore where the SEC is less likely to tread.
Both of these possibilities undermine the protections that would be needed for public investors in any follow on public offering, or IPO, by the hot startup company.