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The Facebook-Goldman Deal: Where Finding Irony is Like Shooting Fish in a Barrel

January 12, 2011

A headline in last week’s Washington Post registers what is the central irony of Facebook’s recently announced deal with Goldman Sachs: “When It Comes To Investing, Facebook is Not For the Masses.”  The article itself, by business columnist Stephen Pearlstein, doesn’t really explore that irony — perhaps because it is too much like shooting fish in a barrel.   But hey, that won’t stop us.

Some background.  Goldman Sachs is working with Facebook to sell shares of the company on the private market.  Structuring the offering as private rather than public has several advantages, not the least of which is that Facebook is exempt from the onerous disclosure requirements that would attend a conventional IPO.

Photo by Frank Kovalchek. Some rights reserved.

The complication, and the controversy, is that even while technically “private” according to the letter of the law, the offering looks suspiciously public from a common sense perspective, in large part because it will likely include thousands of investors.   Essentially, Goldman is able to present it as a private deal only through some creative structuring that includes counting individual investment pools as single investors.  (Under normal circumstances, the SEC considers any offering to be public when it surpasses 499 investors.)

As New York Times DealBook “Deal Professor” Stephen M. Davidoff explains,  Facebook’s exemption hinges largely on the fact that only “sophisticated investors” are being solicited to buy shares.  And the measure for “sophistication” boils down to being a Goldman Sachs investor with a boatload of money to spend.

In other words, the Facebook-Goldman deal is designed precisely to exclude the huddled masses.  Yet Facebook’s core value, we know well, is supposedly openness, inclusion, populism.  The company’s one-sentence mission statement makes this crystal clear: “Facebook’s mission is to give people the power to share and make the world more open and connected.”  Indeed, the company embraces the notion that its social networking site can serve as both a medium and motor for progressive reform.  It even established a “Facebook for Good” page where it can “pay tribute to people who have used the service to influence social change and contribute to a more open and connected world.”

And, of course, there is founder Mark Zuckerberg’s famous (some would say infamous) suggestion that the “social norm” of privacy is a dying ideal — that the age of privacy is over, with Facebook at the vanguard of that historic paradigm shift.

To recap: the world’s greatest champion of the public sphere is doing cartwheels to avoid going public.  Calling this hypocrisy might be going too far.  But the irony is as plain as the nose on your face.

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