Government Investigating Pre-IPO Trading (GS)

SecondMarket has told Bloomberg that they have received SEC requests for information about its handling of pre-IPO shares of private companies. The government entity has recently become interested in secondary markets for private company shares (i.e. shares of companies that do not trade on public markets like the New York Stock Exchange) as Goldman Sachs GS infused $450 million into Facebook via a Special Purpose Vehicle investment, giving the social media network a valuation above $50 billion. SecondMarket says it is "fully cooperating" with governmental requests for information. These new types of transactions, done via private financing arrangements, allow "big boy" investors and "smart money" to invest in companies much earlier than the IPO process even begins. Companies like SharesPost and SecondMarket have allowed private companies to trade their stock just like they were public, albeit with some restrictions. Read more here.