It’s still not clear exactly what led up to Goldman Sachs blocking its US customers from investing in Facebook, but it’s obviously a huge embarrassment for the bank.
To back up a few steps, it’s been clear lately that Goldman is putting renewed emphasis on the banking side of the businesses, hoping to downplay the more controversial (and much more profitable) trading side of the house.
Doing the Facebook deal (and likely having the lead on a possible Facebook IPO) was part of that push. That Lloyd Blankfein did a personal visit to Groupon for their likely IPO is another sign.
The Facebook deal itself was already going to be controversial, because at first blush it came off like Goldman finding a way to skirt securities regulations (though later it was made clear that regardless of whether it did a real IPO, Facebook would report financials).
As for the current mess, it’s still a little unclear how it happened.
According to DealBook, at issue is the timing of the original news leak (on January 2) and the SEC’s concern that it looked like advertising a private deal. That’s a no-no.
On CNBC this morning, DealBook’s editor Andrew Ross Sorkin said the relationship between Goldman and Facebook is “frayed,” and that it’s not clear whether Goldman Sachs will still lead a Facebook IPO (if ever there is one).
Clearly part of the issue is that original leak, though obviously Sorkin didn’t say whether it came from the Goldman or Facebook side.
It doesn’t really matter: Goldman wanted to peacock a bit, and do an audacious deal with a high-profile company, and now that’s coming unglued through some combination of bungling (on some side of the deal) and regulatory hostility, which is a major vulnerability for Goldman.
If you’re a tech company like Groupon (or anyone else looking to IPO), if nothing else you might wonder about the wisdom of working with a company that has regulators breathing so heavily down its neck.