{"id":187986,"date":"2011-01-05T21:30:00","date_gmt":"2011-01-06T02:30:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2011\/01\/05\/facebook-to-buy-time-warner-in-a-multibillion-dollar-stock-deal\/"},"modified":"2011-01-05T21:30:00","modified_gmt":"2011-01-06T02:30:00","slug":"facebook-to-buy-time-warner-in-a-multibillion-dollar-stock-deal","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2011\/01\/05\/facebook-to-buy-time-warner-in-a-multibillion-dollar-stock-deal\/","title":{"rendered":"Facebook to Buy Time-Warner in a Multibillion Dollar Stock Deal"},"content":{"rendered":"

Not really, but the obvious parallels between the dot-bomb mania of the late 1990s, and this bit of Vampire Squid*<\/sup> inspired pump and dump, Goldman Sachs is investing money in, and creating a (completely fictitious) market cap for Facebook of around $50 billion.<\/p>\n

Karl Denninger says that it’s a scam, and that whoever invests in after Goldman will be left holding the bag<\/a>, while William Cohan at the New York Times<\/span> runs the numbers<\/a>:<\/p>\n

Despite the high price of its investment, Goldman sees in Facebook a business bonanza, a nearly perfect nugget of investment-banking opportunities. First, Goldman\u2019s cost of capital is close to zero \u2014 as a bank holding company, it can borrow from the Federal Reserve at negligible interest rates \u2014 so any capital gain it makes on its venture in Facebook will be sheer profit. Second, Goldman has almost certainly locked up the role of lead manager of the inevitable Facebook initial public offering.<\/p>\n

Fees for underwriting public offerings are generally about 7 percent of the value of the stock sold. Facebook could easily sell $2 billion of stock or more, generating fees to Goldman and the other underwriters of at least $140 million. The other benefit for Goldman in leading the public offering \u2014 aside from major bragging rights \u2014 is that it can use its marketing, sales and distribution muscle to make sure the value of Facebook at the time of the offering exceeds the $50 billion valuation at which Goldman invested.<\/p>\n

Goldman has also won from Facebook the right to offer an additional $1.5 billion of the company\u2019s stock to its private-wealth clients. According to The Times, Goldman will be creating a \u201cspecial purpose vehicle\u201d to sell the stock to its wealthy clients and then will charge them a 4 percent initial fee plus 5 percent of any profits. While on paper it seems that these high rollers would be foolish to invest in Facebook at such a lofty valuation, they will still most certainly feel increased loyalty to Goldman for making such an exclusive opportunity available to them. On top of it all, there is the increased likelihood that Goldman will get to manage a good portion of the $12 billion fortune belonging to Mark Zuckerberg, Facebook\u2019s founder, for yet more fees.<\/p><\/blockquote>\n

Seriously, we bailed out those contemptible f%$#s for this<\/span><\/span>?!?!?<\/p>\n

By way of perspective, DC at the by invitation only Stellar Parthenon BBS<\/a> noted:<\/p>\n

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