I offered a detailed and illustrative valuation exercise to the professional/institutional (read as, HNW) blog subscribers ( FB note final) and as was usual included a material dollpp for the public blog to chew on. I think many found it quite the engaging read, at the very least.

Well, it appears as if maybe someone at the SEC may have gotten pissed off enough to say "I've had it and I'm not going to take anymore!!!!" From the Wall Street Journal: Goldman to Exclude U.S. Clients From Facebook Deal:

Goldman Sachs Group Inc. decided to exclude U.S. clients from the private offering of as much as $1.5 billion in shares of social-networking company Facebook Inc., citing "intense media attention." In a statement provided to The Wall Street Journal, Goldman said the move came after officials at the New York securities firm "concluded the level of media attention might not be consistent with the proper completion of a U.S. private placement under U.S. law."

Goldman began notifying clients of its decision on Sunday night in Asia, and clients in Europe and the U.S. were being told on Monday, according to people familiar with the situation. In its statement, Goldman said the decision to limit the offering to "offshore" investors wasn't "required or requested by any other party," including the Securities and Exchange Commission.  A Facebook spokesman said that Goldman "is in the best position to answer any questions."

... Private placements like the Facebook deal are subject to strict SEC guidelines, and Goldman's statement Monday suggests that executives grew concerned that huge interest in the offering could expose the securities firm to regulatory vulnerability. One Goldman client was told the deal is being offered only to non-U.S. clients because of regulatory concerns.

A total of about $7 billion in orders for Facebook shares has poured in, according to a person familiar with the matter. That means it is highly likely that Goldman still can pull off the offering at its original size without U.S. investors. Chinese demand is especially strong, said one person familiar with the offering.

That is a damn shame, but also a testament to the marketing prowess of Goldman's brokers and bankers. Anyone who had the opportunity to review the subscription only research ( FB note final) that I released on Facebook valuations should be flabbergasted in hearing that GS can raise $7 billion for a $1.5 billion offereing giving the simply ludicrous pricing.

"They're still committed to doing the deal at the original size," one Goldman client said. But U.S. investors are "going to be disappointed," this person added.

Trust me, either the fallout from my articles, Goldman's fear that the SEC might actually do their job, or some other diving force of mystical origin has actually done some lucky investor soul a big favor.

In its statement to The Wall Street Journal, Goldman said it "regrets the consequences of this decision, but we believe this is the most prudent path to take." Goldman clients are being told to pony up their money for Facebook shares by the end of this week, said another person familiar with details of the private offering.

Of course, it's still not too late to hit some foreigners for their money at fantasy level valuations, along with the "I might stab you in the back" clauses attached. Goldman Sachs disclosed that it might sell or hedge its own $375m investment without warning clients. Under the deal, private wealth-management clients would be subject to “significant restrictions” limiting their ability to sell stakes while Goldman Sachs own holding can be sold or hedged at any time, and without warning. Go figure why anyone would clamor to get into a deal such as this. As excerpted from "Facebook Registers The WHOLE WORLD! Or At Least They Would Have To In Order To Justify Goldman’s Pricing: Here’s What $2 Billion Or So Worth Of Goldman HNW Clients Probably Wish They Read This Time Last Week!"

To put the amount of optimism used in our analysis in perspective, there are 6,892,839,222 people in the world according to the US Census Bureau’s World Clock. Facebook currently claims 9% of that world population. Take into consideration a material percentage of that population are elderly or very young, infirm, illiterate, poverty stricken or located in remote rural areas and do not have iPhones and Androids, broadband connected computers and Facebook accounts, and may not have these things for some time, if ever. For the extremely optimistic benefit of the doubt, let’s assume that all children down to the age of infancy, the infirm, the illiterate and the Australian outback settlers all are frequent or likely Facebook users. Even with this assumption, Facebook will have to hit 65% of today’s total (as in the ENTIRE) world population (not factoring in population growth/shrinkage) by c.2020 to justify anything approaching a $50B valuation – and that’s assuming they captured 65% of every single man, woman and child in the world along the way – not 65% of those who have access to an internet connected computer.

Any of those foreign clients considering an investment should reach out to me. I am quite curious to hear what Goldman said to entice you to bite. In exchange, I'll forward you a copy of our proprietary valuation and you can compare my notes to that of your Goldman salesperson.

More Reggie Middleton on Goldman and Facebook:

If you haven’t read my first four pieces on this topic, please do so for you will easily be able to glean my overarching opinion on this most recent Facebook “investment”:

1. Facebook Becomes One Of The Most Highly Valued Media Companies In The World Thanks To Goldman, & Its Still Private!
2. Here’s A Look At What The Goldman FaceBook Fund Will Look Like As It Ignores The SEC & Peddles Private Shares To The Public Without Full Disclosure
3. The Anatomy Of The Record Bonus Pool As The Foregone Conclusion: We Plug The Numbers From Goldman’s Facebook Fund Marketing Brochure Into Our Models
4. Facebook Registers The WHOLE WORLD! Or At Least They Would Have To In Order To Justify Goldman’s Pricing: Here’s What $2 Billion Or So Worth Of Goldman HNW Clients Probably Wish They Read This Time Last Week!

Higher level subscribers should review the detailed and illustrative valuation exercise to the professional/institutional (read as, HNW) blog subscribers: FB note final.