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Facebook Orders Banks To Stop Leaking IPO Details
redletterdave writes "In the weeks leading up to Facebook's massive $100 billion initial public offering, Mark Zuckerberg reportedly told JPMorgan Chase, Morgan Stanley, Goldman Sachs and the other banks involved in the IPO to stop leaking information to the media. Zuckerberg was reportedly unhappy that the banks leaked details about his company's Wall Street debut, including the Feb. 1 date it chose to file its S-1 paperwork with the SEC. Facebook execs are also miffed about the subtle rivalry between Morgan Stanley and Goldman Sachs, which were jockeying to become the lead underwriter for the IPO, the largest since Google's $1.7 billion offering in 2004. The banks are heeding Zuckerberg's warning, urging their employees to keep quiet about Facebook's filing, because disobeying Zuckerberg's wishes could mean getting dropped from one of the most lucrative IPOs in recent memory. The banks stand to make $40 million from their deals with Facebook."
It's $5B, isn't it? I mean, come on, basic facts too much to ask?
Poor means hoping the toothache goes away.
Remember, a pop in the stock price isn't a sign of success - it's a sign that your underwriter priced your stock too low and you got shafted.
Facebook should have a clause that if the stock pops more than 10% on opening day the lead underwriter must pay them at least 70% of the lost proceeds:
Price: $100/share
Opens: $180/share
Payout from lead underwriter: $56/share
That'll make sure that the models are accurate. The only reason to go to these guys is to maximize the cash you get for your company. Your job isn't to make them and their clients more money.
Just what I was thinking - .04% seems light.
This issue is a bit more complicated than you think.
...Zuckerberg et al. don't know what "Leak" means...
Do not look into laser with remaining eye.
Why is that piece of shit of a website worth so much?
(insert XKCD-of-the-day about sheeples here)
But then how are all those 1% investment bank insiders supposed to find out enough about the IPO to make any money? ;^) ;^(
Clearly, Zuck doesn't know how things are supposed to work
Facebook did, however, sell the names, addresses, and friend lists of every user who has made negative comments about the Wall Street firms involved in its IPO.
Have gnu, will travel.
Aren't SEC filings like this public documents?
Government's idea of a balanced budget: take money from the right pocket to balance...oh who am I kidding?
Sounds like Zuckerberg forgot to change the default privacy settings from public to private.
Maybe Facebook should adjust its privacy settings.
There are things that Facebook doesn't want to share with the world? Now they know how we feel when Facebook fails at honoring basic Privacy settings.
Basically, there are reasons to love this model for everyone involved except the John Q public who get shafted on IPO day with stock that has already had the full value sucked out by the private investors.
disobeying Mark Zuckerberg could mean "unfriending" you on Facebook
The IPO will raise $5B, so it's 0.8%. You're probably confusing the market cap with the IPO size.
Actually, this is pretty ironic considering that Zuckerberg wants everything to be public. Now, we know the guy has limits.
It's all about bucks, kid. The rest is conversation.
Sig this!
Why don't more companies use an IPO auction format so anyone that wants shares can get them? Google did it and it seemed to work out ok for them:
http://online.wsj.com/article/SB125045821555835141.html
It seems more fair for the individual investor - if they want in on an IPO, they can do it, they don't have to be an "insider".
It seems better for the company - their stock gets issued at the maximum price the market is willing to pay, so they get the best valuation they can get.
Of course, it's bad for the banks since they don't get insider shares to give to their preferred investors who all get to share in the "pop" after the IPO. This pop does no one any good except the insiders that got to buy the shares at the IPO price. It's money that the company left on the table, they should have priced higher.
Oh wait, I guess I answered my own question - banks would never go for it for most companies. But, like Google, Facebook had the clout to force it on them.
", Mark Zuckerberg reportedly told JPMorgan Chase, Morgan Stanley, Goldman Sachs and the other banks involved in the IPO to stop leaking information to the media."
Hmmmm.. seems some body wants it both ways....
So hows that feel ?????
Ahahhhhh poor whiner baby not getting it his way... aaaaah.. too bad loser.
When are you facedorqs going to wise up and quit using this crap and twidiot as well.
To the banks, KEEP LEAKING THE INFO!
For those that don't know it Der Furher has selected things for the setup of the company from board to other items which means Der Furher will decide.
1311393600 - Back to Black
So, let me try to get this straight. Is Zuckerberg complaining about a corporation that facebook is compelled to interact with using facebook's "personal" data in ways that, while protected by his terms of agreement with said corporation, are disliked and overly revealing, and he wishes they would stop or at least have explicitly asked him first?
To that, sir, I say, suck it.
Returned Peace Corps IT Volunteer
No, the summary did that for them.
Sorry Zuckerberg, the banks changed their privacy policy. Your information now belongs to them to use or sell as they see fit... sound familiar?
Seven puppies were harmed during the making of this post.
According to what I have read, last year's profits were about $1 billion. Very impressive actually, but not worth $100 billion.
It seems to me that facebook has to be it's membership saturation point, so no super-fast growth.
I could see facebook worth $20 billion, but not much more than that.
Still sounds crazy low. Banking fees for IPO deals are generally 7% for "normal" sized deals (a few hundred million), and around 3% for large deals. You'd expect the fees for a $5B IPO to be around $150M. If they are doing it for less, it's because the value of the prestige and marketing value they get from this deal is worth a fortune to them.
If banks are releasing confidential information to the press, imagine the confidential information they're releasing to their buddies and other insiders. Bankers are corrupt and insider trading is rampant. Another reason Wall Street needs more regulation rather than less.
Fast Federal Court and I.T.C. updates
He's,some pig,some pig
Some terrific, radiant, humble pig
He is some pig
Oh wow look at him now
Zuckerberg's famous pig
Sooey, what do you see
The greatest hog in history
Fine swine wish he was mine
What if he's not so big
He's some terrific, radiant, humble
Thingamajig of a fine phenomenon
My land isn't it grand
Zuckerberg's famous pig
Golly, you got to agree
He's a real celebrity
Fine swine, wish he was mine
What if he's not so big?
He's some terrific radiant, humble
Thingamajig pig
The terrific,.radiant, (Humble x2)
Zuckerberg's x5
Zuckerberg's famous pig
Isn't it ironic that Zuckerberg doesn't like it when the privacy of FaceBooks IPO is violated when his business model is to gather as much private information about the users of FaceBook as possible. There is an old saying that seems to apply here...
"What's good for the goose should be good for the gander!"
"The banks stand to make $40 million from their deals with Facebook"
Um, how? Whose ass did they get those numbers from, Mark Zuckerberg's? They had their first negative membership month already, a gigantic competitor just popped up, just about 100% of their customers hate them, and their stocks are overvalued on top of all of that. How is anyone going to make a penny on this bullshit? Correct answer: people who show up to the bankruptcy server auction. I would suggest investing heavily in U-Haul reservations and plane tickets.
It's the market capitalization that's crazy. Facebook revenue was about 4 billion last year. No company can support a 20:1 price/sales multiple. Multiples that high scream scam.
But it's worse than that. Zuckerberg is keeping control of the voting shares in a way that allows the other investors zero say in how the company is run. He will appoint the directors. He will tell them what to say. He will decide all by himself how much he spends on development and how much on salaries including his own and how much he returns to investors in dividends or stock buybacks.
Only sort of though.
Any IPO is based on projected future revenue. I've said other places, facebook with 800 million users is running out of users that will generate much money, and it's hard to know how much money they can get per users. Sure, there are a couple of billion people in africa, india and china that don't have facebook, but selling seeds for pennies to them isn't really advertising revenue of much value. Then there's the very young and very old, who as a demographic won't ever have facebook pages. Lets say, for sake of argument they get up to 1 billion users, that would be half of total internet users, and some of those are going to be counted multiple times (phones, and computers and home and office for example). So they're getting 4 dollars per user right now, give or take (remember they did grow by a couple of hundred million users in the last year so it's hard to get an exact number). From a billion users there's not much more room 'up'. That's most of the youth of north america, the EU, south america, japan, australia, that sort of thing, and all the rich kids from the rest of the world. But they're valuing at 100 billion, which is say 100 dollars per person. That's a bit of a stretch from their current value *but* and it's a big but, what do they intend to do with the 5 billion dollars in cash they're asking for?
Think about what services they could integrate into facebook that could generate a crap load of revenue. VOIP chat, TV and movie rental that sort of thing, music streaming, search, they could just use their backend technology to help deliver a cloud type service to other companies that would generate revenue etc. Suddenly there are a whole lot of options for things that *could* generate money. Google only has about 1 billion users themselves (2 billion internet users total, google has 65% of the search market which might be that google users search more than non google users or something, their unique visitors per month peaked in may 2011 at just over 1 billion), and they are generating 38 billion dollars a year in total revenue. Now, admittedly, google is a different baby. If I'm looking for a plumber advertising plumbing services where I'm looking is a good idea. If I'm trying to find out where this years christmas party for my GF's family is, probably I'm a lot harder to target ads at.
So that's the point of an IPO, they need cash to grow the business, hopefully into things that will make money. Whether or not they can justify 100 billion dollars as a market cap is anyone's guess, but that's probably also priced based on the fact that there have been a lot of private sales of facebook shares since they waited so long to go public (in other words the typical fervor of future value is already priced in at that level). And even then, assuming they don't implode (which with their relatively healthy, i.e. profitable, balance sheet) they can still do well if the stock dives a bit. 4 billion dollars a year in revenue when your only revenue is sketchy ads and 'facebook points' (which mostly go to 3rd parties) seems like they have a lot of room to grow.
There's imprecise, and there's "we fucked up." My google-fu is weak tonight and I can't find a study showing different sector IPO first-day results. But there's this:
http://abcnews.go.com/Technology/wireStory/ipo-stocks-fared-15525164#.TzDCYJjRUyE
Linkedin: priced at $45, closed at $94.25. Linkedin got screwed out of $45/share.
Zygna: priced at $10, down 5% on first day. Excellent! Zygna didn't lose anything.
Jive: priced at $12, closed up 25%. Not bad for the underwriters and their freinds.
Of course nobody would take the deal - because the game is fixed due to conflicts of interest. The underwriters have a definite conflict of interest - they flog the shares to their customers, and why would they want their customers to take a hit on the first day? Who doesn't want a nice juicy no-risk gain for their brokerage clients and buddies?
And plus, everybody wins - just some people win more than others. That's why Google did when it did when it IPO'd, but that's a game that nobody really wanted to play; they had to, because of the money.
It'd be the same as FB, if they wanted to play.
I would like to purchase 10k worth of shares please.
Sincerely
Poor unemployed IT worker
This however is one of those "deal of the decade" deals, which allows for a whole different level of competition between banks. 40 million USD is no pocket change, even for them, especially with marketing value of "we can pull a deal this huge off well".
ref: Google's initial public offering (IPO) took place five years later on August 19, 2004. The company offered 19,605,052 shares at a price of $85 per share.[46][47] Shares were sold in a unique online auction format using a system built by Morgan Stanley and Credit Suisse, underwriters for the deal.[48][49] The sale of $1.67 billion gave Google a market capitalization of more than $23 billion.[50]
So Facebook is getting them $5b, for a value ranging from $50b to $100b. Google was $23b. So Facebook could be 2-4x what Google was.
Coming from the man who said that privacy was a thing of the past, I find this title highly ironic.
The Wise adapts himself to the world. The Fool adapts the world to himself. Therefore, all progress depends on the Fool.
... to generate a lot of media buzz and excitement around an IPO.
It's reality-TV on Wall St.
Any IPO is based on projected future revenue. I've said other places, facebook with 800 million users is running out of users that will generate much money, and it's hard to know how much money they can get per users.
They have ways of making money from you sheep that you haven't yet dreamed of.
Yeah, your gedankenexperiment on GP's next company 'before you make your first sale' is **totally** the same thing as saying a 20:1 p/s ratio for *FACEBOOK* is too big. Facebook's so tiny they'll definitely **GROW** to fill that ratio. Just like Groupon. /sarcasm
Personally, I can imagine ways that they can grow into the ratio. Per-user revenue is much easier to alter than their customer count, obviously. Whether they do or not hinges on tapping into revenue streams.
Deciding whether they will succeed is the speculative nature of the market.
*But it's worse than that. Zuckerberg is keeping control of the voting shares in a way that allows the other investors zero say in how the company is run.*
kinda like apple then.. what I'm interested is if he is going to pay dividends or not - to set it apart form apple mainly as an investment.
world was created 5 seconds before this post as it is.
Yeah because "unknown startup with zero sales" and "company that's been around for the better part of a decade, has huge name recognition, and already makes millions of dollars" are exactly the same thing.
But it's worse than that. Zuckerberg is keeping control of the voting shares in a way that allows the other investors zero say in how the company is run. He will appoint the directors. He will tell them what to say. He will decide all by himself how much he spends on development and how much on salaries including his own and how much he returns to investors in dividends or stock buybacks.
Good. Companies ran by boards in the interest of shareholders and not the business (not mutually inclusive) typically have a way of fucking over the business, the workers, and the product by driving incredibly hard for cheaper and faster. I think Zuckerberg has done a brilliant move with this. Other than simply retaining control he's also showing shareholders that the direction of the company is stilll in his hands - the same leader that managed to get 10% of the world's population using his product(I read this figure somewhere recently). Love it or hate it - there's something to be said for it.
I was thinking 'total internet users' being counted multiple times. As facebook becomes more commercial I would expect to see more people with multiple accounts as well (professional and personal sort of thing).
The selling of aggregate user data is their biggest weakness. They've been able to get away with a lot of stuff to this point because they were small enough (or the amounts of money were small enough) regulators didn't notice or didn't care. They may run into a lot of hurdles from regulators in every country moving to demand privacy controls.
There are lots of other ways to make money, I was attempting to be illustrative, not a market analyst or facebook executive. If I worked there I'd be looking to cash out and GTFO asap. I'd be very wary of anything they do trying to make money suddenly drawing the ire of regulators and getting things like your employees arrested in despotic countries or your whole revenue stream shut down from sensible ones.
No, he isn't. It's all right there in the Prospectus. As is what they will do with the $5billion. That money is going to paying the existing shareholders and employees. It states any profit from the IPO may be used to build up the company but they have no plans to do so. It says they may also invest in other companies, but again, they have no immediate plans to do so. It's all right there, on Page 34
"Dre don't get as high as me.... I'm Cheech and Chong" - Snoop Dogg
All the other potential revenue streams you ticked off are markets where Facebook would be late to the dance.
To value based on the assumption that they're going to grow to a $100 billion company would require that they have a business plan for doing that (not in evidence) or be uniquely positioned to take advantage of some foreseeable emerging market opportunity (also not in evidence).
What they have that's unique is a huge user base that, for the moment, likes to use their service. But there's nothing to say that the trend won't shift wildly -- to Google+ for instance or away from social networking entirely. I don't think the latter is likely, by the way. But if I were Zuckerberg, I'd see my company approaching number of users saturation and revenue per user saturation and be looking to convert all those years of building the company to cash before the valuation tanks.