The Man Behind Facebook’s I.P.O. Debacle

"............Debacle"

LOL

You say "Debacle" as if it's 100x worse than what you are doing.

LOL

give him a call and compare bank accounts
 
Quote from the1:

Why is this a debacle? This is a homerun for FB! They managed to issue equity shares at what? 40 bucks per share and now it's down to 18-ish. That sounds like brilliance to me. The company sold shares worth 18 bucks for 40 bucks.

Companies want to issue shares as high as possible to maximize inflow of capital. Investment banks want to issue as low as possible so they don't get stuck with inventory they can't unload. FB with the stunning victory!
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You are not looking at the entire picture. When most companies go public their goal is not to maximize the share price and screw over anyone left buying their new stock on the open market, but rather somewhere in the middle. Early investors need to get a good price to cash out at, but you still need to keep the IPO low enough so its attractive to the public and it can get a decent pop on the open. A public company should want to have good relations with their investors and as well as a popular stock to own in the eyes of the market. As of now, most investors hate Facebook and would never touch the stock because of how their IPO went, and Facebook will have an extremely difficult time if they ever want to try and raise money in the future.

The notion of it being a good thing that Facebook screwed over the common investor is idiotic. You can't look at an IPO like it's a basic stock trade and say buy low sell hi, unless the company's plan from the beginning was to just pump and dump and that they think the company is a sinking ship. I am not defending facebook, in fact I can't stand the company, but the only reason investors are calling for Zuckerberg to step down is because they are down 50% in the stock and not because he is a bad CEO (jury is still out on that one).
 
Quote from PlinytheTrader:

You are not looking at the entire picture.

Actually, you are the one missing the whole picture. There are at least 4 groups of people with an IPO with different interests:

1. The company. Their goal is the highest IPO price possible. That is the money the company gets, one time only.
2. The under writers. They want a good price, what would improve in the not too far future, for the sake of the allocated share buyers and for new investors. But not a one day jump and then burn...
3. Early investors. They are usually happy with the IPO price, but what they want is price stability, so they can still cash out at a later date with lots of stocks.
4. New investors/traders.(who didn't get allocated shares) Those are the ones wanting a huge jump right after the IPO.

When most companies go public their goal is not to maximize the share price

As I described above, that's exactly what they want, because they only get paid once, at the IPO's price.

the IPO low enough so its attractive to the public and it can get a decent pop on the open.

FB popped from $38 to $44, it just didn't last.

Now there are IPO's where it is prudent to wait a few days and buy in then and still catch a nice rally, just like ZNGA...
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Quote from Pekelo:

Quote from PlinytheTrader:

You are not looking at the entire picture.

Actually, you are the one missing the whole picture. There are at least 4 groups of people with an IPO with different interests:

1. The company. Their goal is the highest IPO price possible. That is the money the company gets, one time only.
2. The under writers. They want a good price, what would improve in the not too far future, for the sake of the allocated share buyers and for new investors. But not a one day jump and then burn...
3. Early investors. They are usually happy with the IPO price, but what they want is price stability, so they can still cash out at a later date with lots of stocks.
4. New investors/traders.(who didn't get allocated shares) Those are the ones wanting a huge jump right after the IPO.

When most companies go public their goal is not to maximize the share price

As I described above, that's exactly what they want, because they only get paid once, at the IPO's price.

the IPO low enough so its attractive to the public and it can get a decent pop on the open.

FB popped from $38 to $44, it just didn't last.

Now there are IPO's where it is prudent to wait a few days and buy in then and still catch a nice rally, just like ZNGA...
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I'm not sure you want to use ZNGA as a great example, their top level managers are getting let go left and right over their stock collapse. As I see it you have 3 options when pricing your IPO:
1) Price it too low where you leave a lot of money on the table but your stock takes off and becomes one of the great success stories for people who bought in early
2) Price it at a midpoint where you still capture decent money for your company while new investors are happy as the stock goes higher and your IPO is labled a success.
3) Price it high where your company gets maximum value for the IPO but your stock prices collapses angering every investor and becoming the butt end of many jokes and the topic of numerous ET threads on conspiracy theories by your company to screw over investors. Your stock becomes toxic an no one wants to admit ever buying it and the price continues to free fall as your company loses credibility. And of course you might lose your job as CEO b/c people only care about stock price and will question your abilities going forward.

So to me if I was running a company, the best option is still #2 but that's just my opinion on an online message board.
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Quote from PlinytheTrader:

When most companies go public their goal is not to maximize the share price and screw over anyone left buying their new stock on the open market, but rather somewhere in the middle.
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Yes, that's the old investment banker club view. Then they - the old line IBs - get to skim off of "the middle".

FB outplayed 'em.

Well done.
 
Quote from Pekelo:

...just like ZNGA...
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Zynga was a scam from the beginning. They couldn't get that IPO out fast enough, as behind the curtain the business was completely collapsing. If they could have gotten a higher price, they absolutely would have, as the company was built by ex-EA management specifically as an "IPO and get the hell out" play.
 
Quote from Random.Capital:

Zynga was a scam from the beginning.
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Getting $10 for a scam is still pretty good. The point with ZNGA was that after its dip, it still went up 40% compared to the IPO, and even more counting from the low of the dip... So very early investors could make 20-30$ before the decline started....
With FB, the rally only lasted a few hours....
 
Quote from PlinytheTrader:


So to me if I was running a company, the best option is still #2
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Sure, I agree that those are the options, but as I already explained, different groups have different interests. So you will always find a group preferring one of those options.
 
Quote from Pekelo:

So very early investors could make 20-30$ before the decline started...
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They shouldn't have been able to make anything on that stock.

That they did is merely an indication of how well the fleecers did their jobs.
 
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