One reason for Facebook IPO mess: Zuck didn’t care
By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Facebook has reminded investors of a simple lesson: Avoid companies whose bosses donât care about you. From the get-go, Mark Zuckerberg, the social networkâs not very sociable founder, made clear he had little interest in welcoming public shareholders. That indifference set a tone for his executives, venture capitalists and bankers that arguably contributed to the glaring flaws in Facebookâs initial public offering last week.
True, the companyâs earlier backers, who were able to unload more than $10 billion of stock at the highest possible price, may consider the deal worthy of high-fives and Cristal. But the combination of a stock already trading well below its offer price, annoyed retail investors – many of them Facebook users – and regulatory probes constitutes a botched deal. And thatâs without mentioning trading glitches, which were presumably beyond the companyâs control.
Thereâs also the impact on Facebookâs reputation and morale. Where the Silicon Valley titan was once viewed as a benign force connecting people, albeit with occasional privacy concerns, it now risks being synonymous with Wall Street money-grubbing. Thatâs bad for a product dependent on consumers. Itâs also harmful for morale internally and, along with a listless stock price, for recruitment.
The irony is that these issues – along with the lawsuits now piling up on Hacker Way – may be exactly what Zuckerberg hoped to avoid by keeping his company private for so long. As he made plain in his letter to prospective investors, âweâre going public for our employees and our investors.â
Contrast his hands-off approach with the attitude of Microsoftâs Bill Gates back in 1986. Gates insisted the companyâs IPO underwriters set a lower price range than they thought achievable, according to a Fortune story on the process, settling on $21 a share. That helped make the IPO an easy hit for incoming investors, even in the early days of trading.
By all accounts, Zuckerberg is Steve Jobsian in his attention to detail when it comes to coding for his internet creation. But the vacuum created by his distance from the IPO allowed underlings to make decisions – for instance in pricing and allowing early VC investors to ratchet up their sales – that may have damaged Facebook. In this respect, Zuckerberg has failed an early test as the CEO of a public company.