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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.
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.
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.
I shouldn't reply to a AC, but here I go:
People use the website. Selling Ads, they are able to generate an income/profit.
Spelling and Grammar errors have been added to this post for your enjoyment
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
they don't use meta moderation?
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.
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.
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.
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.