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Can Facebook go public without going public? The company sure seems like it’s trying, arranging a deal with Goldman Sachs to create a special investment option for wealthy clients who will be able to invest as much as $1.5 billion in the social-networking giant. But the WSJ says that the Securities and Exchange Commission has now opened an inquiry into the legality of the deal as well as others of its kind. It’s also examining financial disclosure rules for private firms to determine if they might need re-writing.
SEC officials are worried that Facebook might be trying to do an end-run on a rule that private companies can’t have more than 500 investors without having to disclose their finances. The special investment vehicle that Goldman is creating will allow some of its high-end clients to pool together and be treated as one of Facebook’s investors. The Journal says that, for now, the inquiry — which possibly could lead to a rule change — is at an “early stage.”
Even with little information available to them, investor response to the Facebook offering has been so strong that Goldman Sachs plans to stop soliciting more bids tomorrow, according to the WSJ. “It’s a blowout,” said one Goldman employee.