Mark Zuckerberg’s new IPO religion wins disciples

October 18, 2013

By Jeffrey Goldfarb
Thea author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Mark Zuckerberg’s new religion should attract plenty of disciples. The Facebook founder’s early contempt for the idea of an initial public offering was supposed to influence a generation of Silicon Valley entrepreneurs. The stock’s calamitous debut in May 2012 only reinforced the resistance. Zuckerberg and Facebook have come around, though – and many others are set to follow.

Facebook’s antisocial attitude to public shareholders derived from Zuckerberg’s worry that the market glare would distract his engineers and undermine the company’s hacker culture. Even after triggers in securities laws made it all but impossible for Facebook to remain private, Zuckerberg’s hoodie-clad reluctance was palpable. Then, once publicly traded, the shares swiftly halved, confirming the fears of so many wunderkinds with an app and a dream.

Marc Andreessen, a tech high priest whose venture capital firm Andreessen Horowitz has backed dozens of firms including Facebook, shared Zuckerberg’s skepticism. As recently as July, he was saying “the IPO market is deeply broken” with startups growing quickly and delaying the sale of their shares to the public. The new U.S. JOBS Act also makes it easier for private firms to put off the decision to go public and to raise capital by other means.

The Valley’s hymn sheet is changing, though. At a summertime Fortune gathering of technology executives, Bill Gurley, a partner at rival early-stage investment firm Benchmark, exalted founders like Amazon’s Jeff Bezos and Salesforce’s Marc Benioff for embracing Wall Street’s bright lights. And public markets are functioning just fine. In 2010, 70 U.S. venture capital-backed companies went public, according to Thomson Reuters. That’s consistent with pre-crisis 2006 when there were 67 such IPOs, and even pre-tech-bubble 1998, when there were 78.

Zuckerberg is also now a convert. A tripling of the company’s shares to a level well above the issue price will have helped persuade him Facebook’s IPO was a good thing. And new tech issues of late have attracted eager followers. For example, shares of Veeva, a cloud-based software company, nearly doubled in their debut on Wednesday.

Devotees of Zuckerberg’s achievements are dropping the old anti-IPO orthodoxy. Investors and bankers say dozens more venture capital-backed debuts are coming, many of them filed confidentially for now under the JOBS Act. It’s hard not to bow to the almighty dollar.

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