One reason for Facebook IPO mess: Zuck didn’t care

May 23, 2012

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 don’t care about you. From the get-go, Mark Zuckerberg, the social network’s 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 Facebook’s initial public offering last week.

True, the company’s 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 that’s without mentioning trading glitches, which were presumably beyond the company’s control.

There’s also the impact on Facebook’s 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. That’s bad for a product dependent on consumers. It’s 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, “we’re going public for our employees and our investors.”

Contrast his hands-off approach with the attitude of Microsoft’s Bill Gates back in 1986. Gates insisted the company’s 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.

Comments

The stock is not worth 10 much less 38 and the Zuck knows it BUT it is not his fault.. Gorman/MS “advised” him and all those insiders like Thiel/MS/GS et al wanted to squeeze the public for as much as Madoff would have.. to line their own pockets..

Posted by Bludde | Report as abusive
 

Zuckerburg didn’t fail at anything. He cares deeply about his company, he just doesn’t care about being rich. His goal was simple: get as much cash as possible for Facebook to enable the company to do as much cool stuff as they can dream up while selling the minimum proportion of his company and retaining full control over his company.

Now that Facebook’s got the cash he could care less about this week’s share price. Zuck’s goal is to shape the human experience in a meaningful way. He knows that revenue is essential to keeping Facebook thriving, but will never be a slave to share price.

Posted by Valpey | Report as abusive
 

Of course he doesn’t care. Why would he?
1) He lives like a millionare, although he is a multi-billionare. He doesn’t care for more money, profit or divedends.
2) He has no intention of selling. He will likely never sell. Appreciation of the company and its market value mean nothing to him.
3) He is donating everything to charity anyways; nothing is being passed down to his kids.

Realize that he controls the board, and therefore can continue to neglect profits and market value. The high priced IPO met his needs exactly… it gave the company the most money for the least amount of shares. He doesn’t care that the market reacted poorly by running down the price afterwards.

Posted by polydonk | Report as abusive
 

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