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Facebook Finds New Friends in the World of Private Finance

February 23rd, 2011 at 09:18am Under Economy Report

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This is the VOA Special English Economics Report.

Facebook is the world’s biggest social network — and the subject of the movie “Social Network.”

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The real Mark Zuckerberg and his friends at Harvard University launched the site in two thousand four. Facebook says it reached five hundred million users last July.

Now, the American bank Goldman Sachs and the Russian company Digital Sky Technologies have friended Facebook. They are investing a total of five hundred million dollars in the company. The deal values Facebook at fifty billion dollars — more than many publicly traded Internet companies.

Goldman Sachs is expected to raise a billion and a half dollars more by selling shares of ownership in Facebook to rich investors. The plan does not include a public stock offering — at least not right now.

For now, Facebook would remain a private company — meaning a company that does not sell shares to the public. The plan has brought new attention to the largely secretive world of private financing and the rules for private companies in the United States.

The idea is that investors in public companies have protections that investors in private companies do not. The Securities and Exchange Commission says a private company must report financial information if it has five hundred shareholders or more.

A new business, a startup company, is usually considered too risky for average investors. But a promising startup may find a small number of private investors, often known as “angels.”  These investors are willing to lose everything for a chance at big returns.

Rikki Tahta has been involved in raising money for startups. He is now chairman of his own investment company, Covestor, with offices in New York and London.

Mr. Tahta compares the difference between public and private companies to the difference between marriage and dating. When people are dating, he says, there are understandings but few rules. In marriage, the rules are more clear and well-defined.

In his opinion, the only real benefit for a private company is lower administrative and record-keeping costs. Yet he tells us Covestor remains a private company after a few years because it is still too risky for most investors.

And that’s the VOA Special English Economics Report, written by Mario Ritter. You can comment on our programs and find transcripts and MP3s at voaspecialenglish.com. We’re on Facebook, Twitter and YouTube at VOA Learning English. I’m Steve Ember.

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Effort to Enforce ‘Net Neutrality’ in US Takes New Direction

June 27th, 2010 at 05:35am Under Economy Report

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This is the VOA Special English Economics Report.

Officials in Washington recently lost a ruling over their power to enforce competition on the Internet. Now the Federal Communications Commission has a new plan.

The F.C.C. currently defines high-speed Internet as an information service. As such, its powers to set rules for broadband service have never been clearly recognized. But telephone service is a recognized area for the agency to regulate. So the F.C.C. proposes to redefine broadband as a telecommunications service.

Congress could give the agency clearer powers over broadband. But F.C.C. Chairman Julius Genachowski calls his plan “a third way.”

He says the commission would act narrowly and enforce only parts of existing law. He says the government is not regulating the Internet. The changes are meant to support net neutrality — the idea that all Web traffic should be treated equally.

Last month’s ruling by a federal appeals court involved Internet service provider Comcast. The judges ruled that the F.C.C. had no legal basis for an effort to keep Comcast from limiting access to some services over its network. The company said file-sharing users were slowing its traffic.

Broadband providers say regulating them would hurt investment. Verizon Communications called the chairman’s plan “legally unsupported.”

As it happens, the plan was announced on May sixth — the same day as the “flash crash” on American stock markets. The Dow Jones Industrial Average briefly suffered a severe drop.

On Tuesday, the Securities and Exchange Commission announced new “circuit breakers” to support orderly trading. The plan involves the Standard and Poor’s list of five hundred stocks. Stock exchanges have agreed to temporarily halt trading of any stock that rises or falls ten percent or more within five minutes. The rules will be re-examined in six months and could be expanded.

And, in another development, the Senate voted Thursday to permit final debate and a vote on a financial reform bill. The House of Representatives has passed its own bill already. The House and Senate versions will need to be combined into final legislation for President Obama to sign into law.

The proposed changes in financial rules are the most extensive since the nineteen thirties. The president says the aim is not to punish banks but to protect the larger economy and the American people.

And that’s the VOA Special English Economics Report, written by Mario Ritter. I’m Steve Ember.

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