Goldman may sell Facebook shares without warning

Goldman Sachs
Group Inc
. clients considering whether to buy shares in closely held
Facebook Inc. should take heed: Wall Street’s most profitable securities firm
could unload its own holdings without letting them kn

In the last
sentence of a one-page investment profile sent to private wealth clients, the
firm explains: “GS Group may at any time further reduce its exposure to its
investment in Facebook (through hedging arrangements, sales or otherwise),
without notice to the fund or investors in the fund.”

The offering
document, obtained by Bloomberg News, shows that $75 million of the $450 million
investment in Facebook by Goldman Sachs is coming from Goldman Sachs Investment
Partners, a hedge fund that handles client money. The firm’s own $375 million
investment will probably be cut to $300 million because Goldman Sachs expects
to sell $75 million to third parties or to the fund it created so clients could
buy a stake in Facebook.

“There may be
conflicts of interest relating to the underlying investments of the fund and
Goldman Sachs,” according to the Facebook offering document’s disclosures
section. Material in the documents “is not guaranteed as to accuracy or completeness.”

Goldman Sachs
paid $550 million in July to settle fraud charges filed by the Securities and Exchange
Commission relating to the 2007 sale of a mortgage-linked investment called
Abacus. The company said it made a “mistake” by failing to inform clients in
the 2007 deal that it allowed a hedge fund betting against the investment to
help put together the deal.

Stephen Cohen, a Goldman
Sachs spokesman in New York,
declined to comment yesterday. Jonathan Thaw, a spokesman for Facebook, also
declined to comment.

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