My Take on the Facebook IPO

Facebook is now officially a publically traded company. Shares have traded on secondary markets for several years, but those markets have strict rules with regards to whom can invest. Now, anyone can buy a couple shares. Many were hoping FB would bring some excitement to Wall St. – or at least allow people to forget about Europe for a day. It wasn’t to be. FB priced their shares at 38 bucks, and the stock closed at 38.23 on Friday. Many consider this an utter failure. I don’t, and here’s why.

Most companies that go public have little or no say in anything. The investment bank they hire tells them how much to raise, what the valuation should be, how many shares to sell and what the price range of the shares will be on opening day. Because of this, the investment banks often under price new offerings a little so their large clients can make some easy money. That’s what happened to LinkedIn. The shares were grossly under priced, so the company didn’t make nearly as much as they could have.
Facebook is an entirely different story. The company was so desireable, they got to call the shots. They decided and dictated everything. They decided how many shares they would sell and how much they would raise. They determined the price range, and then they decided to price the IPO at $38. They even dictated the fee they were willing to pay to the investment banks. Because of this, FB priced their offering as close to perfection as they could. Instead of the investment banks and their clients making money, FB raised as much money as they possibly could have. They priced their offering perfectly – they squeezed every last dollar out of Wall St. it could and left nothing for the investment banks. They did what thousands of companies have dreamed of doing. The fact that Morgan Stanley may have a crediability issue with some of their large clients is not something FB cares about.
If they would have priced the offering at the top end of their initial range ($34), then Friday’s close above $38 would look like a nice pop on the first day. Instead they priced the offering at $38 to squeeze every penny out they could. The only ones to suffer in such a situation are the investment banks and their buddies. Facebook’s goal was to raise as much money as possible, not enrich the investment banks. For this reason alone, the IPO was a huge success.
If you’re a FB shareholder and are pissed off right now, let me clue you into something. Mark Zuckerberg doens’t give a rat’s ass whether you own the stock or not or whether you make money. He doesn’t care even a little bit. Any lip service he pays to “returning value to shareholders” is a bunch of bullshit he has to say. FB has a 20-year plan. They don’t care what their stock does day to day or even month to month. In fact the only reason FB went public is because they had to. Per SEC rules, once you have > 500 investors, you must go public. If Zuckerberg had his way, he’d stay private forever.