Slashdot Mirror
Mark Zuckerberg's Big Facebook Mistake
Hugh Pickens writes "Nathan Vardi writes in Forbes that in the last two months, Mark Zuckerberg has had a rude introduction to the capital markets. With Facebook's stock in free-fall, down more than 40% from its IPO price, Zuckerberg has a big problem. 'Zuckerberg did not want to deal with the pressures of being a public company. Like many entrepreneurs these days he viewed the capital markets with suspicion,' writes Vardi. 'So Zuckerberg made a fateful decision, he decided to keep Facebook a privately-held company for much longer than other success stories like Google or Amazon.' But waiting eight years to conduct an IPO has turned out to be an impossible problem to manage. The bankers at Morgan Stanley applied all the lessons of the last 15 years and priced the IPO at $38, which was very aggressive, in an attempt to avoid leaving any money on the table and the embarrassment that a huge IPO pop would represent. With such a big valuation at IPO time, Facebook had to show some results. But the numbers that Facebook announced in its first quarterly earnings report were underwhelming and the trading hordes drove Facebook's stock down by 15% in Friday morning trading. Now the early institutional investors are heading for the exits and it's hard to imagine morale at Facebook won't take a hit that correlates with the loss in value of the shares belonging to the employees. 'The lesson of the Facebook fiasco for Silicon Valley is clear. Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.'"
Now the suits will start flying, and filing suits.
Did I get FP? Golly.
It's easier to be a result of the past, but more fun to be a cause of the future! http://www.spacefinancegroup.com/
Wall Street greed strikes again. I'm just glad that I wasn't stupid enough to invest. My off-the-cuff valuation would have been somewhere around $5/share.
So the problem is Zuckerberg's alone to bear? How about the responsibility of the Banks in price fixing the IPO? How about the attempted over inflation of the stock by those same banks on opening day? How about the SEC and their lack of (either ability or willingness) enforcing their own rules and regulations?
I'm not a fan of Facebook by any means. They have done numerous shitty things and continue to do shitty things. The Capitalist Economy has mechanisms for dealing with those practices. To blame the financial fiasco on one person is simply ludicrous!
-The wise argue that there are few absolutes, the fool argues that there are no probabilities.
seriously? with a straight face? ahahah yes I want a bunch of idiot suits derping about next quarter's profits at the expense of long-term growth.
by betting on the spy machine? Hahahahaha!
Zero sympathy, you insect!
Does anyone else find that logical jump a little odd?
Everything is better with chainsaws.
Hahahahahahahahahaha oh. You were serious. Right after saying:
The bankers at Morgan Stanley applied all the lessons of the last 15 years and priced the IPO at $38, which was very aggressive, in an attempt to avoid leaving any money on the table and the embarrassment that a huge IPO pop would represent.
That sounds like a huge amount of discipline.
Zuckerberg is a billionaire. He has no problems worth worrying about. If he doesn't like what he's doing, he can quit and buy a tropical island.
Give me Classic Slashdot or give me death!
The sad part is that Facebook IS capable of making money, just not gazillions of dollars worth. I've been wondering all along HOW Facebook was going to justify valuation. I guess we have the answer now -- it can't.
Proverbs 21:19
isn't ranting about Google+ and how Facebook is great because they "get" platforms anymore...
General Electric produces aircraft turbofan engines and nuclear reactors and medical imaging machines.
Caterpillar produces heavy construction equipment.
Intel produces CPUs.
Ben and Jerry produces ice cream.
Facebook produces... nothing. It adds no value. It doesn't do anything that you can't do just as well without it, and if notoriously fickle public preferences shift like they did from Myspace, Facebook will be a has-been a year after that. It's a convenience, nothing more.
Their IPO was comically overvalued by any rational standard.
What kind of fucking retard are you letting mislead you about macroeconomics?
Whoever it is I suggest you find someone else because you are a woefully misinformed dumbass.
Speaking of retarded dumbasses...
What do you think causes recessions, Einstein, if not bad decisions? Fucking elf magic?
An enigma, wrapped in a riddle, shrouded in bacon and cheese
Lesson 2: Investors are so stupid they still believe banks after the toxic mortgages fiasco in which they were lied to morning and night.
Lesson 3: Investors are so stupid they believe a fashion business in a volatile industry is worth sackloads of money.
Lesson 4: Nobody ever missed a bonus through screwing investors.
Yup, looks like they applied all the lessons.
From scarped cliff or quarried stone she cries "A thousand types are gone, I care for nothing, no not one."
How does the share price falling hurt Facebook? They sold the shaes at the IPO price so they already got the money. If they want more money in the future they issue more shares... Basically Facebook just got shitloads of money in exchange for a marginal loss of control. How are they losing out?
In Soviet Russia meme tires of you!
The investors and the market made a huge mistake.
Zuckerberg did what he had to do for himself . He's no philantropist.
The value of anything is what people are prepared to pay, and if people are prepared to pay $38 a share then that is what they were worth on that day at that point in time. Like many people I thought that was too high and didn't buy. That's okay, that's how markets work. If you thought it was a good buy then you were wrong and you lost some money, that's the nature of this type of investment. You may or may not get it back depending on how long you hold it and how well Facebook does.
I don't think anyone can say that the signs weren't there when so many people were saying it was overvalued.
"XML is like violence. If it doesn't solve your problem, use more." - Anonymous Coward
He got WAY more cash out of the IPO than what the company is worth. Contrast this with Google's IPO, where they undervalued it.
How is that a mistake? The only mistakes made were by people that purchased at the IPO price.
"The lesson of the Facebook fiasco for Silicon Valley is clear."
The lesson is very clear, don't cash out, keep control of the revenue stream and take your profits from that. I know a guy who was paid small amounts of stock in private silicon valley companies, owns 2%. He gets dividend checks for $500, $2500, $1000, $10,000, $50, $3000. Over the last twenty years he's gotten around $150k. Meanwhile I see guys working startups and busting their ass for what turns out to be $30--50k when all is said and done.
"....can't escape the discipline of the capital markets..."
Discipline.
That's a funny word to use with a market that:
- turns trades of tens of millions of shares in literally seconds
- acts like a flock of frightened sheep at the slightest whiff of trouble
- punishes companies who accept short-term sacrifices in favor of long-term growth/gains.
Our company "went public" and I am hard-pressed to understand who - other than the execs, who get fat options and big share-piles - benefits?
The company CERTAINLY doesn't.
Where previously you had a private firm whose only real measure was year-on-year viability as a company, now we have a giant firm whose sole strategic goal seems to be "hit the monthly numbers". Foolishness, chicanery, and outright lying seem to all be acceptable tactics, and the business now has a 30-day outlook, instead of the previous generation(s) of CEOs who looked at what it would take to develop markets and commercial potentials in decade-long or even (for a family company) generational-length timelines.
-Styopa
Yet another crippling bombshell hit the already beleaguered Facebook community today when Slashdot (who heard it from Hugh Pickens, who heard it from Nathan Vardi, who heard it at Forbes, which is a sensational money magazine) announced that Facebook is dying. The rate on superpokes is plummeting, and as for Farmville cows, you can't even _give_ them away...
Why should the shareholders get any compensation?
I don't have any Facebook stock because I AM NOT AN IDIOT.
Anyone with a single brain cell, indeed even most amoebas stayed far away from the Facebook IPO.
The problem was in initial setup conditions and if you were too stupid to figure out the initial price was wrong beyond belief you deserve the loss and pain that resulted.
That is the stock market.
People on Slashdot talk a big game about how they believe in survival of the fittest and evolution but then don't seem to want the game to apply to them...
"There is more worth loving than we have strength to love." - Brian Jay Stanley
You like this.
A little slashdot virtual facebook machine humour for you there ;)
biopowered.co.uk - catalytically cracking triglycerides for home automotive use since 2008. Just say no to big oil!
The good news is that today you lost about $8 billion. The better news is that you still have about $12 billion.
Will just pump more money into it as it is too big an information mine to fail.
Sure we can, all we have do to is continue to hold the company privately.
The bankers at Morgan Stanley applied all the lessons of the last 15 years and priced the IPO at $38, which was very aggressive, in an attempt to avoid leaving any money on the table and the embarrassment that a huge IPO pop would represent.
That's not how it works: FB sold its stock at $38 to the underwriters (the banks), who assume the market risk and sell the stock on the market. It's in the underwriters interests to pay the company a low amount, and see the valuation rise in the market. Companies want a higher valuation, and a jump in the stock price does NOT profit them. When the valuation was raised to $38 at the last minute, it was good for FB and bad for the banks.
I can only assume this fundamental aspect of IPOs is ignored because it doesn't make for a good story.
http://en.wikipedia.org/wiki/Initial_public_offering#Pricing_of_IPO
tomorrow who's gonna fuss
It was a failed IPO for speculators, it was an absolutely fantastic IPO for Facebook. The 2 parties are at odds with each other: the company that is having an IPO wants to sell it's share for a high price, to get as big of a cash infusion as possible, while the speculators want the IPO price to be as low as possible, so when there is a quick "pop" after the IPO, the speculators get rich quickly.
Mark Zuckerberg and Facebook got about as good of a deal as they could've ever dreamed of and with Mark still retaining control over 50% of the shares, he doesn't have to give a damn about the rest of the shareholders even if every single one of them bunched up together to make demands.
Had Facebook gone public earlier, the inevitable "rude introduction to the capital markets" would've occurred at a time when Zuckerberg had far less experience running the company than he does now, and he may have been ousted by the board.
From his personal perspective, he probably made the right move. Maybe he left a few billion dollars on the table, but it seems that hardly matters unless he's planning on buying a professional sports team.
What is Zuckerberg to do? He has a popular product and legions of people with more money than sense who think that any internet sensation must be a goldmine beating down his door for a piece of the (imaginary) action.
Facebook's only value is not in user numbers or user data, it is the minds of people willing to buy Facebook stock.
Zuckerberg's chief problem is the same as everyone else's -- the lost ability to come up with innovations that are actually worthwhile, as opposed to internet baubles and gadgets for yuppies.
Where, exactly, in the whole farce of the Facebook IPO is the 'discipline' of the capital markets?
We saw the Respectable Institution fuck up the offering price, we saw the assorted insider shenanigans, we saw the hyping and pumping of the noise-trader losers upon which the more sophisticated feed, we saw the following price drop when the hot air started to leak out...
I'm just not seeing the 'discipline' here
Frankly, were it not for the observable fact that real investment banks and NASDAQ and whatnot where involved, I could have been convinced that the whole thing had been cooked up as some sort of elaborate marxist performance art piece...
Quite the opposite, M.Z. has out-smarted all the professional investors. They lost. He won. The company (facebook) won.
This article linked to popcorn articles about playing with the big boys. The reason the stock is down has nothing to do with "pressures of being a large company". This is about insider trading and "selective disclosure" which shows how corrupt wall street works behind the scenes. The SEC needs to crack down on wall street and not allow this elitist mentality to happen. The truth is, this IPO was a shell game and it was rigged.
Here's what really happened:
http://www.businessinsider.com/exclusive-heres-the-inside-story-of-what-happened-on-the-facebook-ipo-2012-5
Insider and material information was verbally conveyed to the big investors but not to smaller investors. On May 9th, Facebook filed an amended IPO prospectus with the SEC which implied growth and the appearance that everything was fine. The truth was the that Facebook's value was deteriorating.
Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.'"
But Wall Street can. That was whole point of suspending mark-to-market. They didn't want to have to price their worthless or near-worthless securities at market values. Thus they got the SEC to suspend the time-honored and financially sound principle of valuing assets at what the market is willing to pay for those assets.
Further, Wall Street got the taxpayers to foot the bill for their incompetence AND got to use that money to give themselves bonuses for the great job they were doing.
While Zuckerberg can't evade market discipline, there are those who can, have and will continue to do so.
We will bankrupt ourselves in the vain search for absolute security. -- Dwight D. Eisenhower
was not selling 100% of his stock in the IPO. Everyone (with a brain) knew it was overvalued, its another Myspace, and he only made enough to make him a billionaire. He should have sold everything to those sheep that bought the stock, and walked away counting his money instead of staying on a sinking ship.
Zuckerberg's big mistake was not having a meaningful business plan. It seemed OK to casual investors, but when people bought in and realized the business plan was "gather personal data and sell it", they were less excited. Facebook is not the next Google, it is instead the next AOL.
Damn_registrars has no butt-hole. Damn_registrars has no use for a butt-hole.
Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.'
Sure they can. They can maintain their own equity and grow the company with cash. You only have to deal with the capital markets if you get greedy, in which case, you get what you deserve.
I don't respond to AC's.
"We believed the hype and got suckered into thinking that Facebook was worth more than it actually was. That must be Mark Zuckerberg's problem, because it can't possibly be *my* problem."
I am officially gone from
If the company hasn't lived up to the expectations of the suckers who bought it, well: tough - that's capitalism for you.
politicians are like babies' nappies: they should both be changed regularly and for the same reasons
As long as they did the lying and misrepresentation.... He got their money with little loss of control. F 'em.
I think Facebook's lack of success might be related to Facebook being a fad and not having much of a business model?
Face it, the market got conned, next time they'll offset the risk with a CDS like product so the taxpayer bails them out. Just making money.
growth/production outstripping demand
Except Facebook was overvalued. It's not discipline, it's a free gift from a one time raid on the capital marks.
Re: that last bit - funny how Spain and Italy are both fucked right now because they've had to massively bail out their banking sectors, yet oddly the banksters get to keep their jobs and bonuses while everyone *else* gets to suffer the "discipline" of the capital markets.
The fact that GS and friends have a share price ABOVE ZERO after nearly imploding the world economy means there's no real "discipline", just people like Angela Merkel having BDSM fantasies on a global scale...
He is not the person running Facebook, he is not too bright in the first place.
http://www.youtube.com/watch?v=8lXmDV3_IBA
Look how airhead he is. The real people running it are the people around him and behind the curtain.
This gimp is just a stooge.
That's okay, that's how markets work. If you thought it was a good buy then you were wrong and you lost some money, that's the nature of this type of investment. You may or may not get it back depending on how long you hold it and how well Facebook does.
See that's the problem: folks have confused investing with speculating.
Investing is putting up capital with the hopes of an increase in the underlying asset's value and a cash flow. Such as buying a stock that pays a good dividend.
Buying something with no immediate income with the hope of an increase in value as the sole method of showing a return is speculation.
It's a big difference that's no longer stressed anymore.
We've become a society of speculators. Part of that was Silicon Valley's doing. In the beginning, some highly profitable companies came to the conclusion that instead of paying dividends they would reatian the earnings and pump the money back into operations in the form of R&D, plant and equipment, and other things that would make a hell of a lot more money than what an investor could do on their own. And for a group of companies is was the right thing to do. And eventually, as the companies matured, they started paying dividends. Microsoft and Apple are examples of contemporary companies following that plan.
But these days what's being done is false investing. Building up obscene cash balances or buying back stock which inflates the market price of the stock - both situations are a sign of management's complete incompetence on what to do with the earning of the company and is a sign of decline in the near term.
Of course, Wall Street wanting to paint all of their issues as potential growth stocks Facebook was marketed as this money machine that was destined to increase their earning power. I didn't see it that way and neither did many others. Unfortunately, I think many folks who bought the IPO subscribed to the age old fallacy of the greater fool and the past.
Back iin the 90s, if you bought into an IPO - no matter how shitty the company - you were going to make money because of everyone bidding the price up. Those days are long gone and some folks who participated in the IPO, IMHO, were hoping to buy and watch the FB hype boost their stock for a quick and easy profit. Again - speculation or gambling.
I disagree. The point of an IPO is to get money for the company doing the offering, not to make institutional investors rich. The stock was priced perfectly to extract the most money out of investors and give it to Facebook. Had they priced it at $25 and it had popped to $50, Facebook would have had less money at the end of the day.
Maxim: People cannot follow directions.
Increases in truth directly with the length of time spent explaining them
But he is and will always be far richer then all of us so in this case I will shut the fuck up. I would rather make the mistakes he made then the successes I have made in life.
I haven't thought of anything clever to put here, but then again most of you haven't either.
Are you insane? The guy's made $150K in 20 years - or on average, $7500/year.
The lesson of Sillycon Valley is that you do cash out. You cash out before you crash and burn (Fuck Zuck, has anyone seen ZNGA crashing and burning this week?), because after you crash and burn, you've got nothing.
0) Found company, get some VC.
1) Let the VCs take you public at $20 and a burn rate of $1/year.
2) Watch the stock crash and burn to $2.
3) Take the carcass private a year or two later at $5.
4) Swim around in $20 IPO -$1 burnyear1 -$1 burneyar2 -$5 goprivate = $13/share worth of profit.
If it takes 5 years for a fad to take off, and 4 years to bring a company public, pumping and dumping businesses (in polite circles they call it "serial entrepreneurship") it's the only way to make a buck in this industry anymore.
The employees get screwed either way. But it's better to sell out than fade away.
Why is this somehow a necessity?
I'm god, but it's a bit of a drag really...
I've yet to see evidence of that
Are there any tax experts around? Will he be able to count his "losses" from the drop in share price against his tax bill for essentially the rest of his life? I'm not a tax expert, but I thought this was one of the major perks of having a whole lot of stock that tanks.
Zuckerberg sold a bunch of his stock as part of the IPO. He is set for life.
He isn't responsible for the initial price of the IPO. He didn't set it. He sold as high as he could, cashed out and took care of himself.
The social game crazy may be on the decline (Zynga's stock is also tanking). That accounted for a lot of the page hits and revenue for Facebook. Facebook has failed to branch out into other forms of revenue, and when people actually wanted a Facebook-branded phone, they failed to get anything to market.
Twitter continues to grow. Google+ continues to grow. And more and more kids have Tumblr accounts without Facebook accounts suggesting perhaps the bigger trend. I'm not sure any social network is built to last forever.
http://blindscribblings.com - Tasty pop-culture in conceptual fashion.
They priced it too high.
How can you possibly say it was priced too high? If all of the shares Facebook was selling were bought by someone at $38, then that was the correct price. If they set it at $25 then the price would still be exactly where it is today but Zuckerberg and his friends would have made a lot less money.
The price the stock started at was set to make the current stakeholders the most money possible, not to help make early investors the most money possible.
-- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
What is the discipline of the capital markets? At the end of 1999, Warren Buffett, who had been investing successfully for four decades, was being lambasted for not buying dot-coms and having as good a year as some other companies. Of course, this all went to nothing a few months later. He is known for being out-of-step with the markets, focusing on the long term, not going with the newest trend, not splitting his stock. As he has been so successful over four decades, he can get away with it.
So what companies have been under market discipline? In 2001 the #5 company on the Fortune 500, Enron, was shown to be a complete fraud, top to bottom. Countrywide Financial and Washington Mutual made subprime loans to people who would never be able to pay them back, in a manner that encouraged this (no money down, monthly loan payment rockets up after a year or two).
Other than the markets wanting to have gotten a piece of Facebook earlier, I don't really see any indication of what would have been differently if it was under "market discipline". If overeager suckers wanted to overpay for Facebook initially, it's a bonus for Facebook, and a loss for the market buyers undisciplined enough to know what a stock is worth.
If you watch the documentary "Born Rich", you realize there these 1%ers who inherit there money, these heirs who control almost all of the capital - they need things to parasite off of. There's always a massive of shortage of viable businesses for them to glom off of. Facebook is private and they whine about how they can't stick their snouts in the trough, and suck off of the people actually working and building businesses. Microsoft, Google, Facebook - most of the successful founders know to put off the IPO, because it's only a way for the 1% parasites to grab a majority stake of the company, and be parasites off of those doing the work. That's why founders postpone it so long.
Facebook didn't *need* investors.
This would be as stupid as a Starbucks IPO.
He had to file because there were more than 500 investors. I bet there were actually more, with some of the "investors" being entitites representing multiple real people
Were it not for the SEC rule regarding the number of investors, it all couuld have inflated and popped in the "dark" of some proprietary trading desk.
That's not to say it wouldn't have leaked out and impacted the rest of the market in some way. At least there wouldn't have been as many "Ma and Pa Kettle" investors getting hoodwinked into thinking this was a buy.
I didn't even want to buy puts when they came out--too much time decay (I don't short anything because AFAIK you need margin and the rules for margin allow rehypothecation which could lead to being Corzined). It's still got a growth PE; but where will growth come from when just about everybody who wants an account has one, and is getting bored? Despite that, it could still bounce back up. On or about IPO day I called this as a "strange game. only winning move is not to play". I stand by that analysis.
The stock did sell at 38 though right? Once the shares are on the market you've already gotten your money so to at least to the extent that those are a significant portion of your holdings why do you care anymore? It would be like selling a used car to a dealership for $1000 and then feeling bad that the guy that you sold it to only managed to sell it for $500. It's not yours anymore so why should you care?
Fuck Facebook.
http://finance.fortune.cnn.com/2012/05/03/facebook-ipo-28-35-per-share/
The Palo Alto, Calif.-based social network plans to offer over 337 million Class A shares at between $28 and $35 per share. It's an unusually wide range for such a filing, with most prospective issuers usually only using a $3 spread (e.g., $28-$30).
Facebook will formally launch its roadshow next week, with Morgan Stanley, J.P. Morgan and Goldman Sachs serving as co-lead underwriters. The company's "e-roadshow" is available here.
It plans to trade on the NASDAQ under ticker symbol FB, with the actual pricing expected to come later this month.
The company also today said that 180 million of the offered shares would come from the company itself, while the remainder will come from insiders. Here's a list of who plans to unload part of their stakes:
* Accel Partners: 35.9 million shares, which would leave it with around 153 million shares
* DST Group: 26.25 million shares being offered, left with around 105 million shares
* Goldman Sachs: 13.19 million sharesbeing offered, left with around 53 million shares
* Elevation Partners: 4.6 million shares being offered, left with around 36 million shares
* Meritech Capital Partners: 7 million shares being offered, left with around 33 million shares
* Mirosoft: Offering 6.56 million shares, left with around 26.23 million shares
* Reid Hoffman: 942k shares, left with just over 3.77 million shares
* Mark Pincus: Around 1 million shares, left with just over 4.3 million shares
* Greylock Partners: 7 million shares, left with around 30 million
* Tiger Global Management: 6.56 million shares, left with around 50 million shares
* Jim Breyer (individual, not via Accel): 2.31 million shares, left with around 9 million shares
T. Rowe Price and Andreessen Horowitz are the only significant institutional holders not planning to offer any shares, holding onto all 18 million. Other notable "holders" include Sean Parker (66 million) and Dustin Moskovitz (134 million) -- although both would sell millions of shares as part of the underwriter's "green shoe" option, if exercised.
==
Notably the shares they retained are locked up so they could not even sell on weakness triggers, such as trailing stops. However they could short shares as insurance, but most investors are not leveraged like that. I think it was a couple of weeks till options started trading on FB. So this is a direct hit to the investors. Notably the tax liability is based on the IPO price. So there may be phantom income.
JJ
He extracted lots of money from capital markets and invested it in Facebook. He is the controlling owner of Facebook. He has majority voting power. He can do whatever he wants with Facebook and its stock. He is winning, not "winning".
The rest is noise from the parasites who weren't able to profit as much as they thought they would be able to.
1) Build giant internet company .....
2) Sell shares at a high price.
3) Profit!
4) Profit!
10^10) Profit!
Are you fucking kidding me? No one mentions the strike price for all these employees with bad morale. I'll speculate: $1 for employees, $.1 for the investors.
Oh wait, I'm totally wrong. They're fucking RSU's! Your free money is only worth 40% of $38. Boo-fucking-hoo.
Oracle and unix guy.
When Google had it's IPO it used an auction system that made the pricing more fair, but did not make the underwriters as much money.
http://www.slate.com/articles/news_and_politics/explainer/1999/05/what_is_a_dutch_auction_ipo.html
If you are too lazy to RTFA:
"If the first guy bid $100 per share for the eight shares, and the second guy bid $75 per share for the 12 shares, they only pay what the last guy bid--say, $50 per share."
"Naturally, there is great competition to be one of the lucky few buying shares at the low price. In an ordinary IPO, the investment bank decides who gets to buy these discounted shares, funneling them to its best clients, usually rich individuals or large institutions (pension funds, endowments, etc...). This is a good deal for the prized clients, who make easy money, and for the investment bank, which gets to impress clients. But it's a bad deal for the firm holding the IPO because they could have reaped that capital."
no
What mistake? It sounds like they got the most money for Facebook as they could have gotten, good for them. The price has dropped from IPO to when employees get a chance to sell, but there's no reason to think if they'd started out at a lower price, those employees would have a better price now.
Zuck cannot lose control of the company unless he chooses to. His interest is majority and fully controlling. The board is advisory at best, impotent otherwise.
The following are crucial snips from the S-1 filing:
Our CEO has control over key decision making as a result of his control of a majority of our voting stock.
As a result of voting agreements with certain stockholders, together with the shares he holds, Mark Zuckerberg, our founder, Chairman, and CEO, will be able to exercise voting rights with respect to an aggregate of xxx shares of common stock, representing a majority of the voting power of our outstanding capital stock following our initial public offering. As a result, Mr.ÂZuckerberg has the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. In addition, Mr.ÂZuckerberg has the ability to control the management and affairs of our company as a result of his position as our CEO and his ability to control the election of our directors. Additionally, in the event that Mr. Zuckerberg controls our company at the time of his death, control may be transferred to a person or entity that he designates as his successor. As a board member and officer, Mr.ÂZuckerberg owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders. As a stockholder, even a controlling stockholder, Mr.ÂZuckerberg is entitled to vote his shares, and shares over which he has voting control as a result of voting agreements, in his own interests, which may not always be in the interests of our stockholders generally. For a description of these voting agreements, see "Description of Capital Stock-Voting Agreements."
Controlled Company
Because Mr.ÂZuckerberg controls a majority of our outstanding voting power, we are a "controlled company" under the corporate governance rules for publicly-listed companies. Therefore, we are not required to have a majority of our board of directors be independent, nor are we required to have a compensation committee or an independent nominating function. In light of our status as a controlled company, our board of directors has determined not to have an independent nominating function and to have the full board of directors be directly responsible for nominating members of our board. Additionally, as described in the section entitled "Description of Capital Stock-Anti-Takeover Provisions-Restated Certificate of Incorporation and Bylaw Provisions," so long as the outstanding shares of our Class B common stock represent a majority of the combined voting power of our common stock, Mr.ÂZuckerberg will be able to effectively control all matters submitted to our stockholders for a vote, as well as the overall management and direction of our company.
The Forbes bankster types are just sore because they got played. Worse, they got played by a geek – someone they underestimated because he wasn't wearing a $5,000 business suit, but who proved by his handling of the IPO that he was smarter than all of them put together.
Zuckerberg already cashed out to the tune of a billion dollars. Why should he care that a bunch of arrogant bankers lost money on the stock? Not his problem. He still has a controlling interest in the company thanks to the Class B shares he retained, so the other shareholders can't even force him out.
Zuckerberg beat Wall Street at their own game, and they can't stand it.
The real reason, which remains unsaid but known to everybody, is that Facebook is nothing. It amounts to nothing. If it were to disappear tomorrow the world would just carry on as before. Sure, a few nincompoops are addicted to it, but it would not take them very long to find another source of shallow addiction.
Damn homonyms. Get you every time.
Pretty sure the last tine of TFS is talking about the "beat with a blunt object" form of discipline. Not retaining your composure. At a glace, it sure looks like FB has been beaten about the head and shoulders, left bloody and broken while its stock plummets.
In reality, as discussed earlier, MarkZuck is laughing his disciplined ass all the way to the bank.
This signature is false.
'The lesson of the Facebook fiasco for Silicon Valley is clear. Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.'"
They were doing fine, and now they're not because of the IPO. Why isn't this lesson, 'just don't go public'?
Did you just call the capital markets disciplined? I seriously just spit half a cup of coffee at my screen. That's hilarious.
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Spain and Italy are sovereign nations. They can repudiate their debts and their is nothing private investors can do about it (other sovereign states can resort to force). Of course they might have some difficulty borrowing in the future...
Warning: this article may contain humor, sarcasm, parody, and perhaps even irony. Read at your own risk.
Well, there are at least indications -- and several lawsuits stemming from those indications -- that the only reason they were able to sell shares to the first-in IPO buyers at the price the IPO was set at was because Facebook and the IPO underwriters illegally withheld material information (particularly, revenue projections that were substantially lower than those filed in earlier required disclosures) that they were required to disclose under federal securities laws.
Those indication tend to support the conclusion that the price was too high.
the PE ratio is still 60, meaning at this price, the market still expects very high growth for the foreseeable future. Anything less than that in the coming quarters could see the stock sinking further. Still feeling good about your FB IPO purchase?
I had made "mistakes" like Zuckerberg.
What makes you think that Zuckerberg didn't have an exit plan?
Just peel off a paltry hundred million or so, hidden in the books and secretly deposit it in the Dutch Antilles, or some stable place with no appropriate treaties with the USofA, where he and the misses can retire early!
It's what I would have done.
I killed da wabbit -Elmer Fudd
Well, NASDAQ is for the technical trading problems, but that's kind of a different issue.
Whether Facebook or the underwriting banks or any of the insiders accused of misdeeds in connection with the IPO "give" FB shareholders any money depends, I would think, mostly on the outcome of the many lawsuits that seek to compel them to do so.
If, as the central accusation in many of those lawsuits goes, any of those parties are found to have deliberately withheld material information that they were required to disclose in connection with IPO, then the parties found to have done so are quite likely to be ordered to pay some amount of money to the people financially harmed as a result of that failure.
And growth/production happen on their own without anyone deciding about investing in them?
Where do people get this idea that Mr. Market is a rational man, doling out "discipline" to those who "deserve" it. Mr. Market is a homicidal maniac who eats his young, s about as rational as Jeffrey Dahmer.
"MIT betrayed all of its basic principles."
We're talking about Forbes, here you know?
The East Coast financial world lives in terror that some punk in a hoodie is going to yank the rug out from under them. They love the "techies needs suits" narrative, and go for it whenever they can.
The irrelevant snipe about Greece and Spain is just Forbes waving their flag as "Austerions". Actually the troubles in Greece and Spain result from them not having they're own currency, not with their debt level, but it's very, very important to worry about government debt or some crazies might suggest doing something about 8% unemployment... like taxing the rich to hire teachers.
By the way, if you took Forbes seriously when looking for investment advice, you would almost certainly lose a lot of money: http://www.forbes.com/sites/charleskadlec/2011/02/22/higher-inflation-is-on-the-way/
So calm down, yes this is ridiculous, but it's just Forbes. Tribal loyalty is more important than being right.
They could have stayed private.
They could have priced sensibly.
They could have IPO'd at a time when they were more (accurately) confident of the next quarter.
They could have IPO'd earlier.
There are lots of choices; they just failed to make a good one.
How is this different from Enron? Eventually FB will fade into dust and its stock price zeroed anyway.
It's a sucky deal for the share holders, but a great deal for the company. Use all that cash they were just given to buy back all of their publicly traded shares at the discounted price. Then you send out the net gain as bonus checks to compensate the employees for their restricted stock now being worthless.
"The lesson of the Facebook fiasco for Silicon Valley is clear. Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy."
Wrong. Start-up entrepreneurs can just avoid the whole capital markets and stock market. Stay private. Focus on producing a service or product. Make a profit. Keep what the government doesn't take. Invest some back in the business. Grow slowly.
If you want to make money the best thing to do is do not buy stock but instead buy tools such as a computer, etc. Get raw materials, or make your own, and create product or service. This will return your investment orders of magnitude greater than if you buy stock.
My stock is grazing my other asset. When I want to sell some I harvest it and deliver it to customers. Inventory stays on the hoof, growing, until needed.
"...discipline"? Seriously?
Another thing which contributes to FB's problem is people like me. I use FB but I use Social Fixer, Ghostery and Addblock. I do not see "your fiend liked (product) adds and I don't click on them. I see adds nowhere. I've turned ghostery and addblock off and the internet becomes unusable and worse than times square.
The world is getting sick of advertising and things which use advertising as revenue are suffering. The ones who aren't are using click fraud methods to keep afloat.
So, Forbes "solution" to the problems caused by an IPO is to do it earlier? The scenario described sounds like a great reason to NEVER put your company on the stock market, not to go public earlier. Of course, Forbes et al's solution is always to go with yet another market.
"Got a privately held company that participates in a free market economy? Great, put it on the stock market. Stock market not working out? Great, we'll create another market to trade on the perceived risk. Still not working out? That's ok, we've got a solution. That's right, another market." I'm sure if we just keep creating more markets we'll solve this problem.
Poor facebook employees losing their morale over having gone from ten-millionaires to mere millionaires, just for showing up and driving a desk for 8 hours a day for a couple of years. How awful.
This is almost as bad as the wrap-rage resulting from people having to take a FULL TWO MINUTES to open up their galaxy tabs.
Dear god, I hope that no facebook employees also bought galaxy tabs. The pain, the suffering...the horror they would have to sustain.
That is, you make your money back in 99 years. Toda it is about 120 P/E. Someone bought shares from MZ and early stakeholders including employees on public market on their free will.
Q: who failed basic arithmetics in this transaction?
> He said "stakeholders", not "shareholders". Not the same thing at all.
I'm sure whenever an investment banker uses either term they giggle hysterically.
"......discipline of the capital markets"
Replace 'discipline' with 'greed at making a quick easy buck without doing any real work'
"Are you insane? The guy's made $150K in 20 years - or on average, $7500/year."
Yeah on about 2% of a small closely held company, who paid him a good salary while he was working there. The two main partners that own 60% of the company pull in an average of $100k/year in dividends in addition to salary.
>0) Found company, get some VC.
>1) Let the VCs take you public at $20 and a burn rate of $1/year.
>2) Watch the stock crash and burn to $2.
>3) Take the carcass private a year or two later at $5.
>4) Swim around in $20 IPO -$1 burnyear1 -$1 burneyar2 -$5 goprivate = $13/share worth of profit.
Nah.
0) Found company with VC money.
1) Company fails to gain enough traction.
2) VC's force you out and transfer the assets to one of their other companies..
3) You worked your ass of for nothing.
King Zuck's problem is how to avoid Federal Prosecution rather than anything as lofty as ethics or morality.
Alas, King Zuck, where fore out thou.
[Snicker snicker ... tagged you on Google 'Cam'. What a twit [i.e. shit].]
LoL
bing seems to be useless outside a few key areas.
example: their mapping service is uterly useless outside of USA.
Google Maps used to be the default application on Palm/HP's webOS-powered Pre serie of smart-phone.
at some point of time after the HP acquisition, Google dropped the API which was used by the webOS app (a HTML/Javascript app).
HP provided Bing as a substitute.
Let me say as an European, Bing is an utter catastrophe:
- street are missing or street name aren't properly recognised.
- bing is completly useless in how it tries to recognise or autosuggest names (in europe most street aren't numbered but named after historical figure. If I just give a part of the name bing completely fails to find the street. Lots of street are named "{title} {firstname} {lastname}" like "General Henri Dufour", also unlike English (and German) some language like french (and italian) don't post-fix the street type, but prefix it. In England, it might be "Bakerstreet" but in France it's going to be "Rue des Boulangers". In such circumstances Bing is completely confused)
- bing doesn't attempt to apply heuristics to currently locked position. (very often, if I type some street name, the first few suggestion from Bing would be some obscure US city which hapen to have a homonymous street, even though my position is clearly determined to be in europe)
- bing doesn't recognise common points of interest.
in short, after the move from Google Maps to Bing, I stopped relying on my smartphone to find my way.
I'm not alone in this situation, and thankfully some homebrew developper from Czech republic decided to write a Google Maps replacement for webOS.
- now again is it possible for me to just a few letter of the name of a street or even a building or other point of interest, and google will automatically suggest relevant answers based on my location.
maps on my smartphone are finally usable again.
That is just one example. But it affects lots of people. And there are lots of other situations where Bing is clearly inferior.
Big Data mining certainly isn't that easy, and Google had a big head start before Bing and could accumulate lots of experience.
You can't substitute one for the other.
"Sufficiently advanced satire is indistinguishable from reality." - [Tips: 1DrYakQDKCQ6y52z6QbnkxHXAocMZJE61o ]
Zuckerberg beat Wall Street at their own game, and they can't stand it.
That's correct. Zuckerberg doesn't have a problem. Morgan Staley has a problem. UBS has a problem. Knight Capital Group has a problem. Goldman Sachs, Bain Capital, the Carlyle Group, and the NASDAQ have a problem.
Everybody with a clue knew the Facebook IPO was way overpriced. But the underwriters thought that retail investors and pension funds, not themselves,would end up holding the bag.
where is the problem again? you have gotta be a retard.
Use value versus exchange value, and they are not commensurate! Important point in Econ 101 that most economists quickly forget.
On a tangential note - the other day I had vision of the invisible hand of the free market, and it was giving me the finger...
Mistake? He earned $100B in cash. I don't see how that was a mistake for him. Perhaps not good for Facebook, but definitely good for Zuckerberg,
How would Facebook be now if it doesn't have done its IPO? I personnaly think that the company would be still the same. Perhaps with a little bit less liquidity. It wouldn't have bought the 2 other companies at the prices they bought them. But would Facebook would have been in a better or worst position than now. Is in some cases an IPO not the best solution for a company that is working well. I know that an IPO can make you a lot of money fast that you can reinvest. But thinking long term and gaining that same money little by little without a damocles sword over your head could still be a solution no?
...Facebook will finally be good for something - curing us of this stupid fixation on stock prices. Ever since the dot-com bubble, we (or at least the evening news) have been following the various stock prices and indices as if they meant something for the real world, which more and more they don't. Not that they ever really did.
The problem is, of course, that as soon as people start believing they do, that changes.
Assorted stuff I do sometimes: Lemuria.org
The went public, people bought the shit out of those stocks and then the value tanked. That's pretty good for Facebook because they just made a shitload of money.
The more and more I read about this, I'm becoming convinced that Zuckerberg is definitely a genius. He goes to Harvard, a place with a lot of rich people and a big reputation, and outsmarts them by mere wits. Then goes to the holy grail of capitalism and outmaneuvers them. Even if he's called a douchebag and whatnot (lots of geeks fall into that category), you have to cheer for the nerd who succedeed.
They really should teach how the stock market works in school. In real life, the market imposes very little discipline on a company, at least until the stock price gets low enough that a buyout is feasible. While no one has a controlling stake in a company, there isn't that much discipline imposed on the company. Generally the CEO and board of directors get along well, and the CEO can do whatever they like. If the price gets so low that another company or individual might be able to purchase a controlling take, then that company/person could then fire the CEO. Facebook is a huge company, and in the current climate no one would consider a takeover of Facebook. So Zuckerberg can do pretty much what he likes (obviously if he acts too crazy or does something too stupid the board of directors will get rid of him, but we are nowhere near that territory now).
Can't wait for David Fincher to pick this one up. Perhaps he should wait until the stock price has gone to $0 and everyone's moved on.