Facebook is now worth $50 billion, today's New York Times reports. That's up from $15 billion in 2007.
Because of that rocketship-style growth, everybody wants a piece of the action. But, because Facebook is still a private company, SEC rules say that only big institutions and wealthy individuals are allowed to invest. The rationale is that investing in private companies is too risky for ordinary investors.
The same goes for several other superhot tech companies like Twitter, LinkedIn and Zynga.
Even though the companies are still private, a busy market has emerged for institutional investors and wealthy investors to buy shares of the companies. The sellers are typically venture capitalists, who get shares in exchange for their early investments in the companies, and company employees, who get shares as part of their compensation.
All the action has drawn the attention of the SEC, which recently launched an inquiry into the private trading, the NYT reported last week.
One interesting twist: When a private company has 500 or more investors, it is required to disclose its financial results to the public. Facebook and Goldman Sachs, which is leading the latest round of investment in the company, are apparently looking to skirt that rule.
According to this morning's NYT:
In a rare move, Goldman is planning to create a "special purpose vehicle" to allow its high-net-worth clients to invest in Facebook ... While the S.E.C. requires companies with more than 499 investors to disclose their financial results to the public, Goldman's proposed special purpose vehicle may be able get around such a rule because it would be managed by Goldman and considered just one investor, even though it could conceivably be pooling investments from thousands of clients.
It is unclear whether the S.E.C. will look favorably upon the arrangement.
If the SEC does not "look favorably upon the arrangement," the world may finally get to see just how much money Facebook is making.
But, as Fortune notes, even if Facebook does have to publicly report its financial results, it still would not be forced to sell shares to the general public. That would mean that ordinary investors would remain unable to buy into the company.