26 January 2011

A Slap in the Face - Goldman's Facebook Farce

Don't get too excited when shown the next 'hot' IPO has always been the advice by Private Banking Advisory. Usually the insiders and their commissioned sales agents (aka 'Investment Banks') know more about the business than the great unwashed public (aka 'clients'). Now that potential US investors have learned that they will not be among the 'chosen few' who will be allowed to buy Facebook shares it just added another twist to the sorry tale of problems associated with the handling of Initial Public Offerings.. What may be another sign that the Web 2.0 hype has reached its zenith - or at the very least is close to it - becomes a showpiece of how not to treat your customers. What is also surprising are the fees that Goldman Sachs proposed to charge Facebook investors: It has been reported that Goldman would levy a 4 percent placement fee on clients, plus a half percent “expense reserve” fee. It would also charge a performance-related fee by requiring investors to surrender 5 percent of any profits, known as “carried interest,” according to a Goldman Sachs document. As usual, we could not find any indication about the willingness of the advisor to share in any losses the investors might make.