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.”
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?