Facebook Deal with Goldman Sachs to Offer Freedom from Government Regulations, Or Not!

January 4, 2011, By Alex Ion

Going public in Silicon Valley used to be the rule of thumb for those who wanted to shout out to the world that their company is live and has big plans.

But that’s not the case with Facebook’s Mark Zuckerberg who’s not actually interested in an IPO “until he absolutely has to”. So what does one do about it? Gets Goldman Sachs and other high caliber investors into his business. Privately!

According to insiders on the matter, Facebook has raised a hefty $500m investment from Goldman Sachs and Russian investment firm Digital Sky (who acquired less than 1% shares) that not only gives them cash to take on giants like Google, hire employees or build data centers, it also increases the company’s market value well over $50 billion.

One of the reasons Zuckerberg decided to stay private and get some wealthy investors from Goldman Sachs to invest in his business, was that it offers freedom from scrutiny. And we all know he’d like Facebook to stay off the Government’s radar — according to federal regulations if he’d go public he’d have to disclose his financial results, meaning more headaches for the young billionaire who’s now focusing on taking Facebook to a whole new level.

But the good days may not last long. Apparently, the Securities and Exchange Commission is having a particular interest knowing more about private company trades in secondary markets. Which is why they may decide that the investing public needs to know more about the company’s they’re investing their money in, even if those companies think it’s not in their best interest.

For now, Facebook’s decision to remain private is a luxury, with only a few companies being able to enjoy its effects. “He absolutely doesn’t want to sacrifice control because he believes that his vision is necessary to keep powering the company forward,” said David Kirkpatrick, the author of The Facebook Effect.

So folks, knowing that Facebook will be getting close to earning $2bn from advertising, what do you think will happen to the social network website in 2011?

Will they manage to take on Google?

Will they get into search?

Will they have an IPO in 2012?

We’d love to hear from you!

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