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Mark Zuckerberg's Big Facebook Mistake 418

Posted by Soulskill
from the whatever-the-latest-UI-change-is dept.
Hugh Pickens writes "Nathan Vardi writes in Forbes that in the last two months, Mark Zuckerberg has had a rude introduction to the capital markets. With Facebook's stock in free-fall, down more than 40% from its IPO price, Zuckerberg has a big problem. 'Zuckerberg did not want to deal with the pressures of being a public company. Like many entrepreneurs these days he viewed the capital markets with suspicion,' writes Vardi. 'So Zuckerberg made a fateful decision, he decided to keep Facebook a privately-held company for much longer than other success stories like Google or Amazon.' But waiting eight years to conduct an IPO has turned out to be an impossible problem to manage. The bankers at Morgan Stanley applied all the lessons of the last 15 years and priced the IPO at $38, which was very aggressive, in an attempt to avoid leaving any money on the table and the embarrassment that a huge IPO pop would represent. With such a big valuation at IPO time, Facebook had to show some results. But the numbers that Facebook announced in its first quarterly earnings report were underwhelming and the trading hordes drove Facebook's stock down by 15% in Friday morning trading. Now the early institutional investors are heading for the exits and it's hard to imagine morale at Facebook won't take a hit that correlates with the loss in value of the shares belonging to the employees. 'The lesson of the Facebook fiasco for Silicon Valley is clear. Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.'"
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Mark Zuckerberg's Big Facebook Mistake

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  • Reality bites (Score:5, Interesting)

    by garyebickford (222422) <gar37bicNO@SPAMgmail.com> on Friday July 27, 2012 @03:05PM (#40794317)

    Now the suits will start flying, and filing suits.

    Did I get FP? Golly.

    • by Anonymous Coward on Friday July 27, 2012 @03:06PM (#40794349)

      Couldn't have happened to a nicer guy.

    • Re:Reality bites (Score:5, Insightful)

      by jhoegl (638955) on Friday July 27, 2012 @03:08PM (#40794377)
      It was obvious that the shares would be priced too high. They have been working on hyping Facebook for over a year, and the frenzy by idiots only added to the starting price.
      I think Zuckerberg was right to stay out of a public offering, and he should have.
      There are too many "yes" men and shills in the public offering arena, patting you on the back while drawing a blade.
      Stock markets... pppfftttt, more like legalized gambling.
      • Re: (Score:2, Interesting)

        by Anonymous Coward

        Stock markets... pppfftttt, more like legalized gambling.

        Hey now, let's not forget insurance - legalized and occasionally MANDATORY gambling. Against yourself.

      • Re:Reality bites (Score:5, Insightful)

        by datavirtue (1104259) on Friday July 27, 2012 @03:45PM (#40794987)

        They priced it too high. If it was offered at $25 a share (probably the true value) it would have popped to around $50 and drifted down to $40. This is what happen when you price something wrong on the market. It gets thrown off balance and the pricing pressure results in pain.

        • They priced it too high.

          I disagree. The point of an IPO is to get money for the company doing the offering, not to make institutional investors rich. The stock was priced perfectly to extract the most money out of investors and give it to Facebook. Had they priced it at $25 and it had popped to $50, Facebook would have had less money at the end of the day.

        • Not Too High (Score:5, Insightful)

          by ranton (36917) on Friday July 27, 2012 @03:59PM (#40795175)

          They priced it too high.

          How can you possibly say it was priced too high? If all of the shares Facebook was selling were bought by someone at $38, then that was the correct price. If they set it at $25 then the price would still be exactly where it is today but Zuckerberg and his friends would have made a lot less money.

          The price the stock started at was set to make the current stakeholders the most money possible, not to help make early investors the most money possible.

          • Perhaps too high (Score:5, Interesting)

            by DragonWriter (970822) on Friday July 27, 2012 @04:36PM (#40795613)

            How can you possibly say it was priced too high?

            Well, there are at least indications -- and several lawsuits stemming from those indications -- that the only reason they were able to sell shares to the first-in IPO buyers at the price the IPO was set at was because Facebook and the IPO underwriters illegally withheld material information (particularly, revenue projections that were substantially lower than those filed in earlier required disclosures) that they were required to disclose under federal securities laws.

            Those indication tend to support the conclusion that the price was too high.

          • Re:Not Too High (Score:4, Informative)

            by rsborg (111459) on Friday July 27, 2012 @04:52PM (#40795767) Homepage

            How can you possibly say it was priced too high? If all of the shares Facebook was selling were bought by someone at $38, then that was the correct price.

            You realize that initial covering of this price was required by their underwriter, Morgan Stanley [1]. They were basically sustaining the price at $38 all of opening day.

            [1] http://business.time.com/2012/05/22/facebook-ipo-fallout-four-lessons-from-a-troubling-public-debut/ [time.com]

      • Stock markets... pppfftttt, more like legalized gambling.

        Is gambling illegal where you are? Sheesh.. talk about draconian ;)

      • Re:Reality bites (Score:5, Insightful)

        by Sir_Sri (199544) on Friday July 27, 2012 @04:25PM (#40795499)

        I think Zuckerberg was right to stay out of a public offering, and he should have.

        Tell that to the hundreds perhaps small thousands of employees who had been receiving stock as part of their compensation packages. The reason you have to go public over something like 500 shareholders is that they are entitled to a say in the business, because it's their money, and their business at that point.

        Facebook needs something big to point to and say 'this is how we're going to make money', that, believe it or not, does not actually have to have anything to do with facebook the website and privacy invasion service. Now they are able to make money, 300 million dollars in profit in a quarter (minus stock compensation for employees which pushed them on paper into the negative), for a company with ~4000 employees is pretty good, but they aren't worth 100 billion dollars like that. So either they need something they can legally sell, or they need to expect to lose even more of their valuation.

      • Now, now, now, that's NOT true. You're giving the casinos a bad name.

    • Re:Reality bites (Score:5, Informative)

      by JoeMerchant (803320) on Friday July 27, 2012 @03:10PM (#40794409)

      There are always lawsuits in any big IPO.

      I fail to see how any of this is a problem for MZ, or even out of character for him... he effectively (intentionally or not) suckered the market for much more money up front than Facebook is turning out to be worth. If FB were "priced right" at IPO, it might "perform better" but I don't see how that has any positive benefits for the pre-IPO shareholders.

      TLDR: Not a problem for Zuckerberg, just a problem for anyone who bought FB shares.

      • by mbadolato (105588)

        Really? A TL:DR summary for 3 sentences? That's what we've come to?

    • by jythie (914043)
      If I recall correctly, didn't he cash out immediately (or at least sell off a large chunk) while employees are barred from selling their stock for a year or something?
    • by mwvdlee (775178)

      Nice chest-beating article about how Facebook is dumb and investors are smart.
      Then again, all those investors bought into the $38 IPO in the first place, and lost money because of it.
      If anything, this shows how "the capital market" doesn't know what it's doing.
      In the meantime, Zuckerberg et all have cashed in at a price way too high.

  • by Alien Being (18488) on Friday July 27, 2012 @03:06PM (#40794345)

    Wall Street greed strikes again. I'm just glad that I wasn't stupid enough to invest. My off-the-cuff valuation would have been somewhere around $5/share.

  • Wait, what? (Score:5, Insightful)

    by s.petry (762400) on Friday July 27, 2012 @03:08PM (#40794373)

    So the problem is Zuckerberg's alone to bear? How about the responsibility of the Banks in price fixing the IPO? How about the attempted over inflation of the stock by those same banks on opening day? How about the SEC and their lack of (either ability or willingness) enforcing their own rules and regulations?

    I'm not a fan of Facebook by any means. They have done numerous shitty things and continue to do shitty things. The Capitalist Economy has mechanisms for dealing with those practices. To blame the financial fiasco on one person is simply ludicrous!

    • And, what, if anything, are they going to do about this "problem?"

      I really don't see Zuckerberg, the Banks, the SEC, or anybody else giving FB shareholders any money.

      • by SuperKendall (25149) on Friday July 27, 2012 @03:24PM (#40794675)

        Why should the shareholders get any compensation?

        I don't have any Facebook stock because I AM NOT AN IDIOT.

        Anyone with a single brain cell, indeed even most amoebas stayed far away from the Facebook IPO.

        The problem was in initial setup conditions and if you were too stupid to figure out the initial price was wrong beyond belief you deserve the loss and pain that resulted.

        That is the stock market.

        People on Slashdot talk a big game about how they believe in survival of the fittest and evolution but then don't seem to want the game to apply to them...

        • Not saying they should, just saying that they almost definitely won't.

        • by cpu6502 (1960974) on Friday July 27, 2012 @03:40PM (#40794913)

          >>>People [in banks and megacorps] talk a big game about how they believe in survival of the fittest and evolution but then don't seem to want the game to apply to them...

          That's why they beg Congress for bailouts. "Private profits and socialized losses" to quote Peter Schiff.

        • by bzipitidoo (647217) <bzipitidoo@yahoo.com> on Friday July 27, 2012 @05:29PM (#40796203) Journal

          All that you say would be righteous except for one thing: cheating.

          Morgan Stanley used selective disclosure [businessinsider.com]. "Privileged clients" were informed that Facebook's revenue would not meet expectations. The rest of us were kept in the dark.

          I didn't stay away from Facebook only because it was overvalued and overhyped. I stayed far, far away because I was sure there'd be fraud. These days, small investors maybe shouldn't be in the stock market at all. You do your homework, determine what stocks are good values based on the fundamentals, and then all that goes out the window when management swindles the investors through omission and with fat pay packages and consulting fees to buddies that come straight off the stock's value through options and the like. The markets have yet to earn back the credibility they lost over the subprime mortgage fiasco.

      • I really don't see Zuckerberg, the Banks, the SEC, or anybody else giving FB shareholders any money.

        Well, NASDAQ is for the technical trading problems, but that's kind of a different issue.

        Whether Facebook or the underwriting banks or any of the insiders accused of misdeeds in connection with the IPO "give" FB shareholders any money depends, I would think, mostly on the outcome of the many lawsuits that seek to compel them to do so.

        If, as the central accusation in many of those lawsuits goes, any of those p

    • Re:Wait, what? (Score:5, Informative)

      by gbjbaanb (229885) on Friday July 27, 2012 @03:24PM (#40794673)

      They sold all the stock didn't they - to greedy investors who thought it'd go shooting up the day after IPO and they could make a killing flogging their stock (which I think all the institutions did), or stupid investors who thought that FB is the new paradigm and would take over the world's communications.

      Either way, who cares? The only ones I see whining are those who bought the stock expecting to make easy money. The IPO price was obviously set at the right price as there was enough demand.

      As for FB itself, it's still a private company, old Zucker didn't want any pesky shareholders (ie company owners) voting on what to do so all that stock is (IIRC) non-voting. So apart from a huge pile of cash taken from the stupid and/or greedy, nothings changed.

    • Re:Wait, what? (Score:4, Interesting)

      by jeffmeden (135043) on Friday July 27, 2012 @03:26PM (#40794721) Homepage Journal

      So the problem is Zuckerberg's alone to bear? How about the responsibility of the Banks in price fixing the IPO? How about the attempted over inflation of the stock by those same banks on opening day? How about the SEC and their lack of (either ability or willingness) enforcing their own rules and regulations?

      I'm not a fan of Facebook by any means. They have done numerous shitty things and continue to do shitty things. The Capitalist Economy has mechanisms for dealing with those practices. To blame the financial fiasco on one person is simply ludicrous!

      Well he is the captain of the ship... Unless you have reason to believe he was substantially mislead by one of his employees or paid advisors, then yes that company is his to make or break. And right now it is breaking under the weight of a valuation that was so untenable as to be obvious to anyone but the most over-optimistic of investment bankers. He should have known better and didnt. Just think of what else he should know about running a company but doesn't, and extrapolate the probability of his success out. He should have sold his idea to those Harvard dickwads and walked away, at least they have a degree in screwing up businesses, instead of just winging it.

    • Re:Wait, what? (Score:5, Insightful)

      by glebovitz (202712) on Friday July 27, 2012 @04:37PM (#40795617) Journal

      I don't mean to sound condescending, but did you research the history of Facebook before you make uninformed comments? Zuckerberg was very savvy in how he structured the IPO. He kept much more control then would normally be given a public traded company. In essence, he negotiated a position where he was in charge of Facebook's fate. So yes, it is his problem and not those of the banks and investors.

      Everyone seems to be ignore the big Gorilla in the room. The issue isn't the management of the IPO and capital market expectation. It is the distrust that Zuckerberg built around Facebook. There are many users, but few who are interested in opening up their pocketbooks and spend via Facebook's various marketplaces. We buy from Amazon and EBay because then garnered our trust. Facebook scared us away with their missteps over their privacy policy. Whether or not it is warranted or fair, that is the current perception. To quote my ex and close friend, "perception IS reality."

      Zuckerberg has to navigate his way out of this mess. He is a smart and savvy and that will go a long way.

  • Sorry, what? (Score:5, Insightful)

    by Antipater (2053064) on Friday July 27, 2012 @03:11PM (#40794433)
    "Facebook + stocks = shit. Therefore, Facebook should have joined the stock market earlier."

    Does anyone else find that logical jump a little odd?

    • Yes quite odd. The other option is to remain private. There are many huge private companies in the USA: Cargill, Mars, Bechtel, Meijer, etc.

      • Re:Sorry, what? (Score:5, Insightful)

        by HeckRuler (1369601) on Friday July 27, 2012 @03:46PM (#40795015)
        THIS!

        The lesson of the Facebook fiasco for Silicon Valley is clear. Start-up entrepreneurs cannot evade the discipline of the capital markets

        WTF? That is the biggest load of bullshit I've heard since... well, about a week. Facebook could simply choose not to go public. EASY AS THAT.
        Seriously, any time you hear "The lesson is clear", it's probably isn't. It's one of those terms that salesman use to pretend they not full of lies an villainy.

    • by Baloroth (2370816)

      Not really, no. The problem with waiting was Facebook got so large no one really knew what it was worth, and more importantly they did the IPO right as Facebook was more or less peaking in size and revenue. That means investors bought into the company expecting vastly continued growth and expanding revenue (because Facebook had been growing so fast), and ended up with... well, some growth and and revenue increase, but not as much as expected.

      If the IPO had been made earlier, when Facebook was much smaller

      • But see, you're missing my point, which is that both you and the article are making a huge assumption: that FB had to go public. If your friend jumps off a cliff and breaks his leg in shallow water, you don't ask "Well, why didn't you do it at high tide, dumbass?" You ask "Why the hell did you jump off a cliff?"
        • by russotto (537200)

          But see, you're missing my point, which is that both you and the article are making a huge assumption: that FB had to go public.

          The funding deals they made with their private investors probably required that they do so. Typically in such deals if the company fails to go public within a set time, the investors get direct control of it.

  • by SolemnLord (775377) on Friday July 27, 2012 @03:11PM (#40794451)

    Hahahahahahahahahaha oh. You were serious. Right after saying:

    The bankers at Morgan Stanley applied all the lessons of the last 15 years and priced the IPO at $38, which was very aggressive, in an attempt to avoid leaving any money on the table and the embarrassment that a huge IPO pop would represent.

    That sounds like a huge amount of discipline.

    • by Kupfernigk (1190345) on Friday July 27, 2012 @03:18PM (#40794567)
      Lesson 1: Investors are stupid.
      Lesson 2: Investors are so stupid they still believe banks after the toxic mortgages fiasco in which they were lied to morning and night.
      Lesson 3: Investors are so stupid they believe a fashion business in a volatile industry is worth sackloads of money.
      Lesson 4: Nobody ever missed a bonus through screwing investors.

      Yup, looks like they applied all the lessons.

    • by ethanms (319039)

      "discipline" is a concept, by itself we have no idea of the amount... in this case I would imagine they must me the complete absence of it.

  • Billionaire. (Score:5, Insightful)

    by Hatta (162192) on Friday July 27, 2012 @03:13PM (#40794467) Journal

    Zuckerberg is a billionaire. He has no problems worth worrying about. If he doesn't like what he's doing, he can quit and buy a tropical island.

  • The sad thing is... (Score:5, Interesting)

    by wcrowe (94389) on Friday July 27, 2012 @03:14PM (#40794489)

    The sad part is that Facebook IS capable of making money, just not gazillions of dollars worth. I've been wondering all along HOW Facebook was going to justify valuation. I guess we have the answer now -- it can't.

    • by i kan reed (749298) on Friday July 27, 2012 @03:22PM (#40794637) Homepage Journal

      Yes, but the ruinous part is that they will keep trying. A steady reasonable profit is functional for a privately held company, but a publicly held one will be under constant pressure to improve quarterly earnings, and in the medium run, will undermine the existing profit structure to suit outside investors with no actual understanding of the company.

      It's a culture of failure that large U.S. corporations have developed, and the only one immune seems to be Apple(who mostly seem to worry about increasing par value of stock).

    • by SirGarlon (845873)

      I've been wondering all along HOW Facebook was going to justify valuation.

      It didn't have to justify its valuation, it only had to maintain valuation through the IPO so the venture capitalists could cash out.

    • by rwv (1636355)
      Yeah... but adding $38 * N (where N is the number of shares sold during the IPO) to the Facebook balance sheet is better than adding $24 * N. An IPO is an opportunity to fund the operations of a business. Facebook's war chest has $38 * N more than it used to have. They can buy other companies, buy buildings, make payroll, fund lobbyists, and other things that an expanding company needs to do. The fact that the stock is down $14 * N (36%) since the IPO means shareholders have lost a lot of money, but thi
  • isn't ranting about Google+ and how Facebook is great because they "get" platforms anymore...
  • by NoisySplatter (847631) <noisysplatter AT gmail DOT com> on Friday July 27, 2012 @03:19PM (#40794589)

    How does the share price falling hurt Facebook? They sold the shaes at the IPO price so they already got the money. If they want more money in the future they issue more shares... Basically Facebook just got shitloads of money in exchange for a marginal loss of control. How are they losing out?

    • by Fastolfe (1470) on Friday July 27, 2012 @03:38PM (#40794893)

      It doesn't directly impact the company. However:

      1. It affects employees of the company, because employees of a company tend to hold a disproportionate share of their long-term savings in company stock and options.

      2. A public company's board of directors is usually elected by the shareholders. If the shareholders view a falling share price as a sign that the company has problems, they may work through the board (or replace the board) to change the leadership of the company. This is less of a concern with companies like Google and Facebook since the founders own enough shares that they can withstand that sort of pressure.

    • Falling share price can still affect the company in lots of ways.

      - loss of employee morale, inability to attract new talent, inability to keep current talent. Zuckerberg and most of the employees are still holding FB shares, so falling prices affects them badly.

      - inability to buy other companies with your stock. FB bought a BUNCH of companies just before they went public. With falling share prices their power to buy other companies is greatly diminished.

      - inability to raise more capital in the future from s

  • The value of anything is what people are prepared to pay, and if people are prepared to pay $38 a share then that is what they were worth on that day at that point in time. Like many people I thought that was too high and didn't buy. That's okay, that's how markets work. If you thought it was a good buy then you were wrong and you lost some money, that's the nature of this type of investment. You may or may not get it back depending on how long you hold it and how well Facebook does.

    I don't think anyone can

  • "discipline" (Score:5, Interesting)

    by argStyopa (232550) on Friday July 27, 2012 @03:23PM (#40794653) Journal

    "....can't escape the discipline of the capital markets..."

    Discipline.
    That's a funny word to use with a market that:
    - turns trades of tens of millions of shares in literally seconds
    - acts like a flock of frightened sheep at the slightest whiff of trouble
    - punishes companies who accept short-term sacrifices in favor of long-term growth/gains.

    Our company "went public" and I am hard-pressed to understand who - other than the execs, who get fat options and big share-piles - benefits?

    The company CERTAINLY doesn't.

    Where previously you had a private firm whose only real measure was year-on-year viability as a company, now we have a giant firm whose sole strategic goal seems to be "hit the monthly numbers". Foolishness, chicanery, and outright lying seem to all be acceptable tactics, and the business now has a 30-day outlook, instead of the previous generation(s) of CEOs who looked at what it would take to develop markets and commercial potentials in decade-long or even (for a family company) generational-length timelines.

    • by mosb1000 (710161)

      They don't mean that the traders are disciplined, they mean that companies being traded need to be disciplined or risk loosing all their value over trivial nonsense like rumors or a single bad quarter, or a change in direction that happens too quickly.

      • by argStyopa (232550)

        I didn't even mention that bit, and that's the most hilarious - companies' stock performance is no longer even about how they perform, it's almost like a derivative market: you're performing against what the analysts THINK you should be doing.

        So if the analysts say you should see a +5% quarterly growth, and you "only" see 4.8%, your results are 'disappointing'.

        Absolutely insane. I can see looking to the markets to try to raise needed capital, but I would never put my own company out there if I had any choi

    • +1

  • by Anonymous Coward on Friday July 27, 2012 @03:24PM (#40794671)

    Yet another crippling bombshell hit the already beleaguered Facebook community today when Slashdot (who heard it from Hugh Pickens, who heard it from Nathan Vardi, who heard it at Forbes, which is a sensational money magazine) announced that Facebook is dying. The rate on superpokes is plummeting, and as for Farmville cows, you can't even _give_ them away...

  • You like this.

    A little slashdot virtual facebook machine humour for you there ;)

  • The good news is that today you lost about $8 billion. The better news is that you still have about $12 billion.
  • Sure we can. (Score:5, Insightful)

    by mosb1000 (710161) <mosb1000@mac.com> on Friday July 27, 2012 @03:27PM (#40794735)

    Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.

    Sure we can, all we have do to is continue to hold the company privately.

  • by mounthood (993037) on Friday July 27, 2012 @03:30PM (#40794775)

    The bankers at Morgan Stanley applied all the lessons of the last 15 years and priced the IPO at $38, which was very aggressive, in an attempt to avoid leaving any money on the table and the embarrassment that a huge IPO pop would represent.

    That's not how it works: FB sold its stock at $38 to the underwriters (the banks), who assume the market risk and sell the stock on the market. It's in the underwriters interests to pay the company a low amount, and see the valuation rise in the market. Companies want a higher valuation, and a jump in the stock price does NOT profit them. When the valuation was raised to $38 at the last minute, it was good for FB and bad for the banks.

    I can only assume this fundamental aspect of IPOs is ignored because it doesn't make for a good story.

    http://en.wikipedia.org/wiki/Initial_public_offering#Pricing_of_IPO [wikipedia.org]

    • by PaddyM (45763)

      What a surprise. And in my own news magazine, I keep crowing about the death of Forbes Magazine. I'm pretty sure that will happen sooner than Facebook.

  • by dnaumov (453672) on Friday July 27, 2012 @03:30PM (#40794777)

    It was a failed IPO for speculators, it was an absolutely fantastic IPO for Facebook. The 2 parties are at odds with each other: the company that is having an IPO wants to sell it's share for a high price, to get as big of a cash infusion as possible, while the speculators want the IPO price to be as low as possible, so when there is a quick "pop" after the IPO, the speculators get rich quickly.

    Mark Zuckerberg and Facebook got about as good of a deal as they could've ever dreamed of and with Mark still retaining control over 50% of the shares, he doesn't have to give a damn about the rest of the shareholders even if every single one of them bunched up together to make demands.

  • What is Zuckerberg to do? He has a popular product and legions of people with more money than sense who think that any internet sensation must be a goldmine beating down his door for a piece of the (imaginary) action.

    Facebook's only value is not in user numbers or user data, it is the minds of people willing to buy Facebook stock.

    Zuckerberg's chief problem is the same as everyone else's -- the lost ability to come up with innovations that are actually worthwhile, as opposed to internet baubles and gadgets

  • by fuzzyfuzzyfungus (1223518) on Friday July 27, 2012 @03:34PM (#40794829) Journal

    Where, exactly, in the whole farce of the Facebook IPO is the 'discipline' of the capital markets?

    We saw the Respectable Institution fuck up the offering price, we saw the assorted insider shenanigans, we saw the hyping and pumping of the noise-trader losers upon which the more sophisticated feed, we saw the following price drop when the hot air started to leak out...

    I'm just not seeing the 'discipline' here

    Frankly, were it not for the observable fact that real investment banks and NASDAQ and whatnot where involved, I could have been convinced that the whole thing had been cooked up as some sort of elaborate marxist performance art piece...

  • by smooth wombat (796938) on Friday July 27, 2012 @03:39PM (#40794899) Homepage Journal
    Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.'"

    But Wall Street can. That was whole point of suspending mark-to-market. They didn't want to have to price their worthless or near-worthless securities at market values. Thus they got the SEC to suspend the time-honored and financially sound principle of valuing assets at what the market is willing to pay for those assets.

    Further, Wall Street got the taxpayers to foot the bill for their incompetence AND got to use that money to give themselves bonuses for the great job they were doing.

    While Zuckerberg can't evade market discipline, there are those who can, have and will continue to do so.
    • As a follow up to the above, there is the issue of the expiration of the lock up period [marketwatch.com].

      Millions of shares of Facebook may flood the market, driving down the price even further.

      Better tight that seatbelt Mark. There might be significant turbulence ahead.
  • by who_stole_my_kidneys (1956012) on Friday July 27, 2012 @03:39PM (#40794901)
    was not selling 100% of his stock in the IPO. Everyone (with a brain) knew it was overvalued, its another Myspace, and he only made enough to make him a billionaire. He should have sold everything to those sheep that bought the stock, and walked away counting his money instead of staying on a sinking ship.
  • by DogDude (805747) on Friday July 27, 2012 @03:41PM (#40794933) Homepage
    Start-up entrepreneurs cannot evade the discipline of the capital markets any more than can the prime ministers of Spain and Italy.'

    Sure they can. They can maintain their own equity and grow the company with cash. You only have to deal with the capital markets if you get greedy, in which case, you get what you deserve.
  • Translation (Score:4, Interesting)

    by dkleinsc (563838) on Friday July 27, 2012 @03:42PM (#40794943) Homepage

    "We believed the hype and got suckered into thinking that Facebook was worth more than it actually was. That must be Mark Zuckerberg's problem, because it can't possibly be *my* problem."

  • by petes_PoV (912422) on Friday July 27, 2012 @03:43PM (#40794963)
    From FB's point of view the IPO was a success. They sold all the shares they put up for offer and got a very good price. If anyone made a mistake it was the people who bought them at the original $38, not the company that managed to sell them all.

    If the company hasn't lived up to the expectations of the suckers who bought it, well: tough - that's capitalism for you.

  • by TheSkepticalOptimist (898384) on Friday July 27, 2012 @03:52PM (#40795101)

    But he is and will always be far richer then all of us so in this case I will shut the fuck up. I would rather make the mistakes he made then the successes I have made in life.

  • by i_ate_god (899684) on Friday July 27, 2012 @03:54PM (#40795125) Homepage

    Why is this somehow a necessity?

  • by Enderandrew (866215) <enderandrew&gmail,com> on Friday July 27, 2012 @03:59PM (#40795167) Homepage Journal

    Zuckerberg sold a bunch of his stock as part of the IPO. He is set for life.

    He isn't responsible for the initial price of the IPO. He didn't set it. He sold as high as he could, cashed out and took care of himself.

    The social game crazy may be on the decline (Zynga's stock is also tanking). That accounted for a lot of the page hits and revenue for Facebook. Facebook has failed to branch out into other forms of revenue, and when people actually wanted a Facebook-branded phone, they failed to get anything to market.

    Twitter continues to grow. Google+ continues to grow. And more and more kids have Tumblr accounts without Facebook accounts suggesting perhaps the bigger trend. I'm not sure any social network is built to last forever.

  • by br00tus (528477) on Friday July 27, 2012 @04:00PM (#40795197)

    What is the discipline of the capital markets? At the end of 1999, Warren Buffett, who had been investing successfully for four decades, was being lambasted for not buying dot-coms and having as good a year as some other companies. Of course, this all went to nothing a few months later. He is known for being out-of-step with the markets, focusing on the long term, not going with the newest trend, not splitting his stock. As he has been so successful over four decades, he can get away with it.

    So what companies have been under market discipline? In 2001 the #5 company on the Fortune 500, Enron, was shown to be a complete fraud, top to bottom. Countrywide Financial and Washington Mutual made subprime loans to people who would never be able to pay them back, in a manner that encouraged this (no money down, monthly loan payment rockets up after a year or two).

    Other than the markets wanting to have gotten a piece of Facebook earlier, I don't really see any indication of what would have been differently if it was under "market discipline". If overeager suckers wanted to overpay for Facebook initially, it's a bonus for Facebook, and a loss for the market buyers undisciplined enough to know what a stock is worth.

    If you watch the documentary "Born Rich", you realize there these 1%ers who inherit there money, these heirs who control almost all of the capital - they need things to parasite off of. There's always a massive of shortage of viable businesses for them to glom off of. Facebook is private and they whine about how they can't stick their snouts in the trough, and suck off of the people actually working and building businesses. Microsoft, Google, Facebook - most of the successful founders know to put off the IPO, because it's only a way for the 1% parasites to grab a majority stake of the company, and be parasites off of those doing the work. That's why founders postpone it so long.

  • by JDG1980 (2438906) on Friday July 27, 2012 @04:19PM (#40795419)

    The Forbes bankster types are just sore because they got played. Worse, they got played by a geek – someone they underestimated because he wasn't wearing a $5,000 business suit, but who proved by his handling of the IPO that he was smarter than all of them put together.

    Zuckerberg already cashed out to the tune of a billion dollars. Why should he care that a bunch of arrogant bankers lost money on the stock? Not his problem. He still has a controlling interest in the company [slate.com] thanks to the Class B shares he retained, so the other shareholders can't even force him out.

    Zuckerberg beat Wall Street at their own game, and they can't stand it.

  • by doom (14564) <doom@kzsu.stanford.edu> on Friday July 27, 2012 @04:54PM (#40795797) Homepage Journal

    We're talking about Forbes, here you know?

    The East Coast financial world lives in terror that some punk in a hoodie is going to yank the rug out from under them. They love the "techies needs suits" narrative, and go for it whenever they can.

    The irrelevant snipe about Greece and Spain is just Forbes waving their flag as "Austerions". Actually the troubles in Greece and Spain result from them not having they're own currency, not with their debt level, but it's very, very important to worry about government debt or some crazies might suggest doing something about 8% unemployment... like taxing the rich to hire teachers.

    By the way, if you took Forbes seriously when looking for investment advice, you would almost certainly lose a lot of money: http://www.forbes.com/sites/charleskadlec/2011/02/22/higher-inflation-is-on-the-way/ [forbes.com]

    So calm down, yes this is ridiculous, but it's just Forbes. Tribal loyalty is more important than being right.

Numeric stability is probably not all that important when you're guessing.

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