How Goldman Will Cash In on Facebook Fees
Goldman Sachs' new relationship with Facebook is going to bring the firm something it likes more than friends: lots of fees.
As part of the deal in which Goldman is investing $450 million of its own capital, the firm also has the right to raise $1.5 billion from its high net-worth clients— who also want to invest in the huge private, social networking company. And for that right, Goldman is charging dearly.
As Kate Kelly reported on Tuesday morning, Goldman is charging an up front fee of 4 percent on any investment.
People approached about investing also tell me Goldman will charge a .5 percent yearly management fee and will receive 5 percent of any profits its clients make on the deal.
Doing the math gets you to $90 million in fees for Goldman, even if the Facebook investment is not a winner.
Perhaps most importantly, those clients tell me the deal carried a four-year lockup, meaning that even if Facebook goes public prior to four years from now, the investors will have to hold on until then.
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