Will the SEC fault Facebook, Goldman deal?

SEC launches inquiry into Goldman's $450 million investment in Facebook

Looks like the first big funding announcement of the new year comes with its very own SEC inquiry.

The Securities and Exchange Commission (SEC) has initiated an early-stage review of Goldman Sachs’ $450 million investment in Facebook, a deal that could be interpreted as subtly skirting rules governing private companies.

Goldman Sachs contributed $450 million and Digital Sky Technologies (DST) contributed $50 million in a late-stage round for the maturing social network, first reported by the New York Times and yet to be confirmed by any parties involved. (DST is the Russian investment firm most well-known for leading massive rounds for Facebook, Zynga and Groupon.)

Because private companies can only have a maximum of 500 investors before being required to disclose financial data, Facebook has agreed to let Goldman Sachs create a “special purpose vehicle” that will allow any number of clients to invest in the Palo Alto company under just one investor’s name. This procedure will allow Goldman Sachs clients to invest a seemingly endless amount, though multiple sources cite $1.5 billion as the high-end for the firm.

The SEC could end up taking any number of actions. If it finds fault in the loophole Goldman and Facebook are exploiting, the Commission could redraw its rules to force Facebook to disclose its financial information anyway. Or push the company to go public, which would amount to the same thing. On the other hand, maybe nothing will come of this review at all.

But think of it this way: if Facebook is valued higher than some of the most well-established public Web companies, should they have any obligation to disclose financial information?

While big guns like Apple, Microsoft and Google are still very much out of range, with market caps of $306 billion, $240 billion and $195 billion respectively, Facebook’s valuation has already surpassed the market values of News Corp., at $39 billion, Time Warner and eBay, both at $37 billion, and Yahoo at $22 billion. Facebook even appears to be on track to overtake Amazon, the world’s most successful online retailer with a market cap of $84 billion.