By Robert Cyran The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Facebook’s initial public offering on Friday showcases the best and worst sides of capitalism. Execrable puffery accompanies the entrepreneurial achievement of transforming a dorm-room project into a company worth over $100 billion in just eight years. Poor corporate governance, Silicon Valley cronyism, breathless pundits spewing misinformation, bankers in hoodies and manic investors are all on display. And yet the flip side of such indulgence is worth admiring. 

Wall Street’s premier event of the year turned into an outright circus, including a 30-minute delay for the shares to start trading on Nasdaq despite considerable anticipation of the mega-volume that ensued. At its most benign, otherwise serious thinkers about capital markets devoted unthinkable amounts of time publicly debating whether founder Mark Zuckerberg’s casual dress was a slight to investors while financiers cravenly sucked up to the 28-year-old. But there’s a darker side to the hoopla, too. 

What exactly Facebook will become, or even what it wants to be, isn’t entirely clear. This, along with the social network’s rapid growth, allows investors to dream big. Stock analysts played along with this “Faithbook” conceit, creatively reverse engineering models to justify lofty valuations. The headlong indulgences left few to fear Zuckerberg’s control or the gray-market trading that allowed insiders to profit with asymmetric information ahead of the IPO. As insiders sold down, the hoi-polloi was invited to buy in at an alarming 25 times trailing revenue. 

Yet hype and greed are often the best way to interrupt economic torpor, spread new technologies and new forms of organizing business. Booms mobilize assets and talent – and fast. The benefits of the railroad, electricity, telecommunication and computer booms ultimately outweighed the costs of wasteful speculation. 

The same dynamics are evident in Facebook. Zuckerberg began with a simple idea that quickly became revenue-free Internet traffic. The prospect of being part of the next big thing attracted money from all over the world and encouraged clever programmers to come knocking. Entrepreneurs far and wide have taken inspiration from the saga and built businesses on the back of Facebook, and beyond. Amid the unseemly IPO mania, what is on display is the real genius of capitalism: the ability to harness excess.

By Robert Cyran

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Someone should have told Robert Stiller and William Davis to wake up and smell the coffee. The top two board members of cup-of-Joe maker Green Mountain were removed from their posts on Tuesday by their fellow directors after having to sell stock in the company during a quiet period to meet margin calls. The fate of Stiller, the company’s founder and chairman, and Davis, its lead independent director, should serve as a lesson to all.

Consumer addiction to its single-serve coffee machines had made Green Mountain one of the best growth stories of the past decade. The stock rocketed and investors had gotten used to expecting a bright future – its shares were trading at more than 65 times earnings as recently as last September.

Yet the substance of this growth was increasingly being called into question. Aggressive accounting, poor cash flow, a curious series of mergers and patent protection on its coffee systems raised plenty of red flags among short-sellers. Poor quarterly results have made these widespread. The stock has now lost about 80 percent of its value from its peak and halved in price in the past week alone. This fall led to margin calls for the two board members.

Unfortunately, it’s not that uncommon. Over-exuberance about their companies’ prospects mixed with old-fashioned greed has forced executives at companies ranging from Chesapeake Energy to Boston Scientific into similarly embarrassing emergency sales.

The difference at Green Mountain is that its share price decline was so rapid that it caught Stiller and Davis napping. They were forced to unload 5.5 million shares – with Stiller accounting for nine-tenths of that – to pay their lenders while the post-earnings ban on insider stock sales was still in force.

By Robert Cyran The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Dependence on Facebook spreads far and deep. It’s not just social networking junkies that have grown reliant on Mark Zuckerberg’s website creation, which on Thursday filed a new version of the prospectus for its impending initial public offering. Businesses such as online gamer Zynga have been created on its back. Bankers are pegging their careers on floating the firm. And the state of California needs the IPO to help close its yawning budget gap.

It’s not too strong to use the term addiction when talking about the type of relationship many Facebook users have with the site. Everyone has a friend who posts compulsively or has heard someone brag about quitting, only to relapse. The data tell the same story. The average user spends more than six hours a month on the site, according to ComScore.

This interaction has provided fertile soil for others. Big advertisers are shifting their advertising to Facebook, as its ballooning revenue shows. And an ecosystem of other firms has grown up around the social network. Online gaming prodigy Zynga – worth about $6 billion – has been trying to wean itself off Facebook. But it generated 94 percent of its revenue off the site in the fourth quarter of 2011. A slew of smaller firms make apps for users. They get a ready-made audience but cough up a chunk of sales made on the site and are beholden to Facebook’s whims.

Even firms on the other side of the country are relying on Facebook. New stock sales are a lucrative Wall Street niche. True, the social network’s heft means it will pay less than the typical 7 percent underwriting fee. But even a fraction of that is nothing to sniff at when a company is raising $5.7 billion from the sale of new stock at the midpoint of the indicated range, and existing owners are selling almost as much again of their shares. And the prestige of taking Facebook public could pay dividends for years as banks like Morgan Stanley, JPMorgan and Goldman Sachs pitch their services to other companies considering IPOs.

Nobody needs Facebook like California, though. The deal could net the state $2.5 billion in income tax receipts over the next five years, according to Sacramento. That’s enough to make a noticeable dent in its projected $9 billion deficit for this year. Moreover, numerous small businesses have grown up in Facebook’s Silicon Valley shadow. These high-salaried jobs – and the associated taxes – are good news for California’s finances. Facebook’s debut is more than Zuckerberg’s day in the sun.

By Robert Cyran

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

It’s too soon to be doubting Apple. Fears over a slowing U.S. smartphone market and chip problems sent investors scurrying in April, when the company’s shares tumbled by over 10 percent. But the iPad maker smashed expectations yet again, almost doubling profit in the latest quarter. The trends powering Apple – China, rising margins and the halo effect – still have legs.

Two events drove the recent selloff. First, supplier Qualcomm warned it was having problems producing enough of its most advanced chips. Second, sales of iPhones at Verizon Wireless and AT&T were less than analysts had been expecting. That led to the idea the U.S. market for advanced cellphones was inching to maturation, a development that could lead to operators slashing the rich subsidies that benefit Apple.

The panic that lopped off nearly $80 billion from Apple’s market value, before a 7 percent recovery after the market closed on Tuesday, seemed overblown from the start. It doesn’t use Qualcomm chips yet. It may put them in the next iPhone, but that means there are still several months to fix the shortage. Moreover, Apple’s size and importance mean it is first in line for production. As for smartphones, it’s probably too early to worry about subsidies. An operator that can’t offer a competitively priced iPhone will bleed customers.

More importantly, Apple’s results show very little has changed about its growth trajectory. Demand is rocketing in China, where iPhone sales grew five-fold. More corporate users are trying out Apple’s gadgets. IPhone and iPad users are still converting into Mac users. Computer sales grew 7 percent, faster than the market as a whole. Gross margin is rising – now at 47 percent – an indication of Apple’s astonishing pricing power. As a result, the company generated another $14 billion in cash in the quarter, almost as much as it promised to return to shareholders this year.

Chief Executive Tim Cook seems to have settled into Apple’s sandbagging habit, saying the past quarter was extraordinary, but the current one could be tougher. Hard times will eventually descend on Apple’s 1 Infinite Loop headquarters, but there’s little reason to suspect it will be any time soon. With the shares still trading at a mere 13.5 times estimated earnings, investors should keep the faith.

By Robert Cyran The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Making physical items from digital files is a hot technology – maybe too hot if the market reaction to the acquisition of privately held Objet by Stratasys is any guide. Despite few synergies and an odd poison pill, the buyer’s shares rose nearly 25 percent, mainly on potential revenue synergies. But the future isn’t quite here yet.

A 3D printer takes digital blueprints or scans and recreates them one very thin layer at a time. The process is already quickly encroaching in product areas like replacement teeth and prototypes for new goods. That explains why the top lines of both Minneapolis-based Stratasys and the Israeli Objet are growing faster than 25 percent. But it’s the idea of upending the field of manufacturing to create custom items one at a time without having to worry about shipping costs that makes such technology truly exciting.

Stratasys, and its chunky acquisition, make it the biggest and most attractive way for investors to play the sector. The $600 million price seems fair. Objet accounted for 43 percent of the combined company’s sales last year and a roughly similar amount of income, and will wind up with 45 percent of the combined equity. Moreover, management reckons it can slash up to $8 million in costs and up to $4 million in taxes annually. Those are worth about $75 million to shareholders today.

That doesn’t explain the nearly $180 million increase in the market value of Stratasys following the announcement. Investors seem to think uniting the knowledge of working with different materials and strengths in separate areas – for example, Objet in medical devices and Stratasys in manufacturing prototypes – will make the sum worth considerably more than the parts.

That perception could be distorted. There are many competitors in this fast-growing field, and new ones are springing up. Even Stratasys management didn’t seem to expect the reaction. The company enacted a temporary poison pill to ensure activist investors couldn’t blow up the deal, even though Stratasys was already trading at a heady 30 times estimated 2012 earnings. The growth of 3D manufacturing is no illusion but the market appears to be enhancing the reality.