Goldman Sachs' Facebook Investment: The Pop Quiz

by Derek Loosvelt | January 04, 2011

The first big juicy financial story of the year has everybody and their Mother's Facebook friends trying to figure out what the implications are in Goldman Sachs investment in Mark Zuckerberg's empire. Is this the first leg of the race toward the most highly-anticipated IPO in history? Another shady maneuver by the investment bank everybody loves to hate as of late? Or just a matter of a bank largely known for its shrewd investing strategy jumping at another sound financial opportunity?

See how well you're informed on Goldman's investment by taking the quiz below. Bonne chance.

Multiple Choice

1. How much money, approximately, does Goldman Sachs stand to make from its Facebook investment?
(a) $900 million, double its investment
(b) $5 billion, if all goes well
(c) a $h!tload, and them some -- especially if GS wins the beauty contest to determine who will lead-underwrite the forthcoming Facebook IPO, and if GS is chosen to serve as Facebook's M&A advisor when Zuckerberg and gang begin to devour the smaller fish in their way once the IPO has been sold
(d) a+b+c

2. How did Goldman Sachs arrive at its $50 billion valuation of Facebook?
(a) That's what some 20-something son of one of its MDs in Hong Kong told them it was worth
(b) Three analysts and two associates as well as one VP and an MD stayed up all night drinking rye whisky and watching women disrobe, and in the morning over omelets the figure came to one of the associates and the others nodded in agreement
(c) Multiplying Facebook users by the number Winkelvoss twins, adding the GS bonus pool for 2010, subtracting Fabrice Tourre's 2007 salary, and mulitiplying by the amount that GS paid to the SEC to settle that pesky lawsuit last year
(d) Luck

3. Complete the following sentence: If I had $450 million, I would ...
(a) invest in Facebook, a great company which offers excellent products and which serves as a model of how a start-up can not only serve mankind in a sustainable, socially responsible fashion, but can also make for a helluva movie about greed and bratty Harvard kids and how the rest of us follow them blindly into the abyss.
(b) quit my job and travel the world.
(c) quit my job and go back to B-school.
(d) All of the above


True or False

1. The SEC is so much dumber than the executives at Facebook and Goldman Sachs, which is why the GS investment will stand as is and Facebook will still be considered a private entity with fewer than 500 investors and still won't have to publicly report its financial results.

2. Lloyd Blankfein has a Facebook account with, as of January 4, 2011, 12:28 p.m. EST, 12,875 friends.

3. If you work at Facebook, you will automatically be added to Lloyd Blankfein's list of friends.


Essay

1. How does Facebook make money (please limit your response to 666 words or less)?

2. Who do you think has more friends (Facebook and real) and why: Mark Zuckerberg or Lloyd Blankfein?

3. If you were one of Goldman Sachs high-net-worth clients and one of your friends who didn't have several million dollars in the bank with which to invest in companies like Facebook (if you must, please pretend that you have friends who are not millionaires and thus do not qualify as "high-net-worth" clients and thus are unable to make these sort of investments only offered by private wealth managers at Wall Street banks) and this "friend" asked you if she could buy a Facebook share or two from you, would you sell the share or shares to her? Why or why not? And, if yes, at what price would you sell the share(s)?

Filed Under: Finance


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