What Facebook did right!

There been lots of articles about how Facebook IPO was a mistake.  I can’t speak to anything illegal that Facebook did wrong by giving a wink to institutional investors, but I do have a strong opinion on why IPO pop is not good for a company.

“Less than three days before Facebook Inc.’s initial public offering, Chief Financial Officer David Ebersman decided to boost the number of shares the company would offer investors by 25%…That decision by the 41-year-old Facebook executive may have doomed any real chance the social-networking company had that its stock would jump on its first day of trading—a hallmark of successful IPOs.”

Inside Fumbled Facebook Offering, by SHAYNDI RAICEANUPREETA DAS and GINA CHON

So let me get this straight, it’s a fumble because the stock hasn’t just automatically increased by 50%.  Who makes out best?  Is it the company/investors/employees?  No.  Every long term investor (and I am including employees in this group) doesn’t make out well long term.  Only the bankers who are looking to make out make out.  If I sell you a house today and you can’t flip it next day for 1.5x or 2x, am I the idiot or did I sell it to you for fair price?

Henry Blodget, of business insider, does a great explanation of this phenomena and why conventional wisdom is wrong.





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