FACEBOOK: Now It All Makes Sense

Now it all makes sense. 

The reason it doesn't matter that Goldman's Facebook investment vehicle almost certainly violates the SEC's rules is that Facebook has announced that it will exceed 500 shareholders this year regardless of whether

Goldman's clients are treated as a single shareholder or as many shareholders.

Because of this, Facebook will have to file detailed disclosures with the SEC by May 1, 2012, 120 days after the end of the fiscal year in which it breaks the 500 shareholder threshold.

Prior to this announcement, many observers had been left scratching their heads as to how the SEC could permit Goldman to use such an investment mechanism, which seemed obviously designed to avoid increasing Facebook's shareholder count above 500 (Goldman's clients will invest via a "special purpose vehicle" in which all of Goldman's Facebook investors will be aggregated into a single fund). Using such SPVs for this purpose is against SEC rules, and there seemed no other logical explanation for why Goldman would do it.

And there still is no obvious other explanation, except perhaps saving Facebook the trouble of having to deal with so many new shareholders and allowing Goldman to charge its clients massive entry AND exit fees that it wouldn't be able to charge if it were merely selling them Facebook stock.

(Actually, come to think of it, those are two pretty good explanations!)

But, in any event, it's all moot.

Now that Facebook has said it will exceed the 500 shareholder threshold this year regardless, the SEC's likely "remedy" has already been achieved.  By the end of April of 2012, if not before, everyone will finally know the full details about Facebook's financial performance and business.

Bear in mind, however, that this does NOT mean the company has to go public. All it has to do is file financial statements.

So the crazed masses who are being shut out of Goldman's "private Facebook IPO" may even then still have to watch from the sidelines.