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Facebook Orders Banks To Stop Leaking IPO Details 110

redletterdave writes "In the weeks leading up to Facebook's massive $100 billion initial public offering, Mark Zuckerberg reportedly told JPMorgan Chase, Morgan Stanley, Goldman Sachs and the other banks involved in the IPO to stop leaking information to the media. Zuckerberg was reportedly unhappy that the banks leaked details about his company's Wall Street debut, including the Feb. 1 date it chose to file its S-1 paperwork with the SEC. Facebook execs are also miffed about the subtle rivalry between Morgan Stanley and Goldman Sachs, which were jockeying to become the lead underwriter for the IPO, the largest since Google's $1.7 billion offering in 2004. The banks are heeding Zuckerberg's warning, urging their employees to keep quiet about Facebook's filing, because disobeying Zuckerberg's wishes could mean getting dropped from one of the most lucrative IPOs in recent memory. The banks stand to make $40 million from their deals with Facebook."
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Facebook Orders Banks To Stop Leaking IPO Details

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  • by GuruBuckaroo ( 833982 ) on Monday February 06, 2012 @09:10PM (#38948411) Homepage
    It's $5B, isn't it? I mean, come on, basic facts too much to ask?
  • by mveloso ( 325617 ) on Monday February 06, 2012 @09:10PM (#38948413)

    Remember, a pop in the stock price isn't a sign of success - it's a sign that your underwriter priced your stock too low and you got shafted.

    Facebook should have a clause that if the stock pops more than 10% on opening day the lead underwriter must pay them at least 70% of the lost proceeds:

    Price: $100/share
    Opens: $180/share
    Payout from lead underwriter: $56/share

    That'll make sure that the models are accurate. The only reason to go to these guys is to maximize the cash you get for your company. Your job isn't to make them and their clients more money.

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Remember, a pop in the stock price isn't a sign of success - it's a sign that your underwriter priced your stock too low and you got shafted.

      It could also be a sign that the stock is wildly overvalued beyond expectations. VA Linux?

      • by t4ng* ( 1092951 )
      • by nedlohs ( 1335013 ) on Monday February 06, 2012 @10:44PM (#38949005)

        That's irrelevant, that overvaluedness could have gone into you pockets (you could have issued a smaller percentage of the company for the same amount of capital raising) if the IPO was priced higher to start with.

        The big banks want undervalued IPOs. Sure it harms the "client" - but that client is a one off - that "I" part makes it unlikely you'll be doing it again after all.

        However, those big institutional investor clients of the big banks - they like seeing the price of the stocks they just bought shoot up fast. And they'll be buying more stocks in future IPOs, so keeping them happy is well worth it.

        Hence the big banks like to undervalue IPOs. Of course in this case they're screwing facebook. Couldn't happen to a nicer guy and all...

    • Dumb question, why don't they just spread their IPO over, say, 2 weeks, and sell at the market price each day?
    • Not necessarily.

      If an IPO goes out and the stock stays near flat or slumps, it gives it bad momentum. Example: Pandora
    • by rednip ( 186217 )
      First off you're right,secondly, I don't think that an underwriter would never agree to such a term, nor would the company want a clause that was designed to encourage them to find a lower stock price. While I'm no expert on the subject, I don't believe that an IPO is ever even most of the shares, it's more a 'taste' for the market. On some levels it's like the free sample at the supermarket. Subsequent sales are brought in at the market price once that has been established. Besides, it also sets up the
    • by quarterbuck ( 1268694 ) on Monday February 06, 2012 @11:28PM (#38949267)
      What you said should be true, but it is not in many (and specifically in this) case
      Usually companies do a public offering of a chunk of their private stock to raise working capital, fund growth etc. In those cases the company wants to get as high a price as possible. It used to be the case that the banks would indeed shaft the companies by allocating stock to their preferred customers at a low price and letting the stock pop (giving profits to these "preferred" clients). After the dot com bust, NY courts have come down on this practice pretty hard.
      In this case, Facebook is only IPOing 5% of their stock. So what price it is is sold is less important than having it sold at all. And even more strangely, the company has no need for the IPO proceeds. The prospectus specifically says that the reason for having the IPO is to have an opportunity for the privately held stock to be sold later on. It also says that no specific use for the 5 Billion has been found.
      So in that sense they do want the stock to pop after launch -it gets everyone excited and hopefully the euphoria will last 6 months when the insiders can finally sell.
      • by gl4ss ( 559668 )

        fb would have had to start doing filing the paperwork anyways, due to the amount of shareholders already being numerous enough.

        maybe it's more about giving the insiders, those guys who were paid with options, an actual way to cash in though.

      • It also says that no specific use for the 5 Billion has been found.

        I'll look after it for them for a couple of years til they make their mind up, if they like.

    • any person or company that could accurately predict what a stock is going to do within 10% of an IPO would be an overnight billionaire. There are simply too many variables and outside influences, not to mention emotional factors that make such an accurate prediction practically impossible. If you can come up with a formulae that can get close then you will have people knocking down your door with wads of cash to get their hands on it.
    • by metlin ( 258108 )

      A few points:

      1. No underwriter worth their salt would ever agree to such a clause.

      2. There is only so much you can model; a large part of it is market sentiment (especially for something like FB), which is quite hard to predict or gauge.

      3. Being underpriced and volatile is better than being overpriced in the long run. If you're underpriced, your valuation will go up, and there is a greater demand for the unsold equity at a much higher premium. Being overpriced hurts that, and while profitable to the company

  • by TWX ( 665546 ) on Monday February 06, 2012 @09:10PM (#38948417)

    ...Zuckerberg et al. don't know what "Leak" means...

  • by Anonymous Coward

    Why is that piece of shit of a website worth so much?

    (insert XKCD-of-the-day about sheeples here)

  • by Anonymous Coward

    But then how are all those 1% investment bank insiders supposed to find out enough about the IPO to make any money?
    Clearly, Zuck doesn't know how things are supposed to work ;^) ;^(

  • by Anonymous Coward

    Facebook did, however, sell the names, addresses, and friend lists of every user who has made negative comments about the Wall Street firms involved in its IPO.

  • by PPH ( 736903 ) on Monday February 06, 2012 @09:22PM (#38948513)

    ... next time, read our terms of use and privacy controls policy. You didn't override the default public settings in some hard to understand control panel. Better luck next time Zuckerberg.

  • by frdmfghtr ( 603968 ) on Monday February 06, 2012 @09:22PM (#38948515)

    Aren't SEC filings like this public documents?

    • Re: (Score:3, Informative)

      by Anonymous Coward

      Yes, they are. What seems to be the issue is that everyone in the blogosphere knew about the filing the day before it was filed.

      • Why does that matter? The company isn't public yet, so finding out news a day early doesn't help anyone.
        • by quarterbuck ( 1268694 ) on Monday February 06, 2012 @11:35PM (#38949319)
          It matters for a few reasons
          1) SEC does not like clients advertising/talking to media etc. in the quiet period prior to IPO. If everyone knew when the documents were being filed, SEC could then treat that period too as a quiet period and would hinder facebook's advertising. It can also block any private capital raising that facebook is doing.
          2)It affects prices of related stocks. Look at how linkedin, zynga stocks jumped the day after facebooks filings. It would have been easy to buy those stocks the day before filing and sell it the day after for a significant profit. It is true that linkedin/zynga stocks should not move on facebook news, but certainly their volatility increases when facebooks revenue metrics are released. So anyone buying options on these related stocks the day before profited
          3) If at the last minute facebook wanted to change their bookmakers ( non-lead bookmakers can be changed easily enough), it would be difficult after the news leaks.
    • by fred911 ( 83970 )

      Sec filings are available on to the public thru edgar.

    • by Shoten ( 260439 )

      Actually, no. A lot of filings are, yes. But these kinds of filings are not public at all until later. The point is, to use a crude metaphor, like playing pool. In order to keep things above board, you have to call your shot before you make it. But on the flip side, calling your shot can also harm your business, because you also have the chance to back up and change your mind about when you make your shot and how (unlike pool). So the information is privileged...incredibly so...and as such, any discls

  • by enoz ( 1181117 ) on Monday February 06, 2012 @09:24PM (#38948529)

    Sounds like Zuckerberg forgot to change the default privacy settings from public to private.

  • Opt-out (Score:1, Funny)

    by Anonymous Coward

    Maybe Facebook should adjust its privacy settings.

  • by girlgeek54 ( 806824 ) on Monday February 06, 2012 @09:25PM (#38948543)
    There are things that Facebook doesn't want to share with the world? Now they know how we feel when Facebook fails at honoring basic Privacy settings.
  • by cutinf ( 1261120 ) on Monday February 06, 2012 @09:25PM (#38948549)
    Facebook represents the new model for IPOs and the banks are salivating, of course they are going to lick Zuckerberg's boots. This represents fantastic fee opportunities, not only for this IPO, but I expect they want to rinse and repeat this model:
    1. 1. New company attracts private capital to avoid opening the books to regulators or having to prove revenue streams early in the process.
    2. 2. Banks invest as one of the "500" private investors, syndicating to their wealthy clients through private funds, and taking a hefty slice off the top for playing middle man.
    3. 3. There is so much private capital, and yields on everything are so low (1.9% for 10 years!), companies can easily reach their full potential valuation this way, even 100 billion dollar companies as Facebook has proved.
    4. 4. Banks get to double dip as the private investors unload to the public in the IPO, collecting fees for underwriting and management/placement fees for letting clients in on the action "pre open".

    Basically, there are reasons to love this model for everyone involved except the John Q public who get shafted on IPO day with stock that has already had the full value sucked out by the private investors.

    • Your post makes sense, but I lose you at John Q public getting shafted. Is he buying stock directly? Or is it perhaps the banks buying it for him in his 401k or something... Sounds like a giant ponzi scheme.
      • by cutinf ( 1261120 ) on Monday February 06, 2012 @10:19PM (#38948849)

        Your post makes sense, but I lose you at John Q public getting shafted.

        The public, meaning those not rich enough to access the private funds that typically require accredited investor status (5mil+), are shafted because by extending the time companies stay under the private umbrella, a company can achieve its maximum valuation by IPO time. Companies no longer need to access public markets to get the capital they need to grow, IPOs become less about acquiring funding and more about cashing out. Even the private investors are forced to take a larger gamble on a company under no obligation to provide the level of disclosure they would going public. The big winners are the banks which get to skim in the private shares transactions at much higher rates as they are gatekeepers to limited private shares, as well as companies like Facebook that get funding without the disclosure.

        • IPOs become less about acquiring funding and more about cashing out.

          True, this type of behavior requires and benefits from the "sucker born every minute" adage. However, this only screws the segment of John Q. Public that invests into the stock market without understanding how the stock market works. Every forum I have seen discussing the Facebook IPO compares it to other tech companies and highlights the absurd price-to-earnings ratio, leaving the buyers on IPO day as pure speculators. I understand th

        • by tgd ( 2822 )

          John Q Public has *absolutely* no business getting in on an IPO. That's just sheer insanity from an investment standpoint. IPOs are always offered to institutional investors, because institutional investors understand the risks involved.

          The mess ten years ago was just proof that casual investors have no business being involved in IPOs. That's gambling, not investing.

    • by ceoyoyo ( 59147 )

      Not if John Q Public doesn't buy the ridiculously overvalued IPO stock (and makes sure his pension fund does likewise). There's nothing like a failed IPO to tell a company that you're not falling for their scam.

  • disobeying Mark Zuckerberg could mean "unfriending" you on Facebook
  • Lesser of Two Evils? (Score:3, Interesting)

    by conark ( 871314 ) on Monday February 06, 2012 @09:53PM (#38948717)
    Actually, this is pretty ironic considering that Zuckerberg wants everything to be public. Now, we know the guy has limits.
  • Gordon Gecko... (Score:4, Insightful)

    by actionbastard ( 1206160 ) on Monday February 06, 2012 @10:06PM (#38948793)
    It's all about bucks, kid. The rest is conversation.
  • by hawguy ( 1600213 ) on Monday February 06, 2012 @10:34PM (#38948917)

    Why don't more companies use an IPO auction format so anyone that wants shares can get them? Google did it and it seemed to work out ok for them:


    It seems more fair for the individual investor - if they want in on an IPO, they can do it, they don't have to be an "insider".

    It seems better for the company - their stock gets issued at the maximum price the market is willing to pay, so they get the best valuation they can get.

    Of course, it's bad for the banks since they don't get insider shares to give to their preferred investors who all get to share in the "pop" after the IPO. This pop does no one any good except the insiders that got to buy the shares at the IPO price. It's money that the company left on the table, they should have priced higher.

    Oh wait, I guess I answered my own question - banks would never go for it for most companies. But, like Google, Facebook had the clout to force it on them.

    • The bankers and money changers want their rent but Google or Facebook don't need them. It's a shame Facebook isn't fucking them over.

      Of course, Facebook will raise $10 billion. Last year they had $1 billion in profit so they don't need to go public at all. But with > 500 shareholders, they're required to file the same paperwork as publicly traded companies (Thanks, SEC!).

      • The bankers and money changers want their rent but Google or Facebook don't need them. It's a shame Facebook isn't fucking them over.

        The banks probably cut Zuck&Co in on the deal, so they wouldn't.

    • Mostly because of the rule changes involving follow on offerings. Rule 144A and other acts have made it simpler to issue a limited amount of stock (in case of facebook 5%) and then issue subsequent blocks when the price gets decided in the marketplace.
      The price difference between the auction format and the IPO format only affects the limited amount (5%) of the stocks issued in the primary offering. The follow on offerings are at the price set in the market which reflects (hopefully) the fully informed pr
  • ", Mark Zuckerberg reportedly told JPMorgan Chase, Morgan Stanley, Goldman Sachs and the other banks involved in the IPO to stop leaking information to the media."

    Hmmmm.. seems some body wants it both ways....

    So hows that feel ?????

    Ahahhhhh poor whiner baby not getting it his way... aaaaah.. too bad loser.

    When are you facedorqs going to wise up and quit using this crap and twidiot as well.

    To the banks, KEEP LEAKING THE INFO!

    For those that don't know it Der Furher has selected things for the setup of the com

  • So, let me try to get this straight. Is Zuckerberg complaining about a corporation that facebook is compelled to interact with using facebook's "personal" data in ways that, while protected by his terms of agreement with said corporation, are disliked and overly revealing, and he wishes they would stop or at least have explicitly asked him first?

    To that, sir, I say, suck it.

  • Oh dear (Score:4, Funny)

    by Dunbal ( 464142 ) * on Monday February 06, 2012 @11:19PM (#38949217)
    Sorry Zuckerberg, the banks changed their privacy policy. Your information now belongs to them to use or sell as they see fit... sound familiar?
  • by Anonymous Coward

    According to what I have read, last year's profits were about $1 billion. Very impressive actually, but not worth $100 billion.

    It seems to me that facebook has to be it's membership saturation point, so no super-fast growth.

    I could see facebook worth $20 billion, but not much more than that.

  • If banks are releasing confidential information to the press, imagine the confidential information they're releasing to their buddies and other insiders. Bankers are corrupt and insider trading is rampant. Another reason Wall Street needs more regulation rather than less.
  • He's,some pig,some pig
    Some terrific, radiant, humble pig
    He is some pig
    Oh wow look at him now
    Zuckerberg's famous pig
    Sooey, what do you see
    The greatest hog in history
    Fine swine wish he was mine
    What if he's not so big
    He's some terrific, radiant, humble
    Thingamajig of a fine phenomenon

    My land isn't it grand
    Zuckerberg's famous pig
    Golly, you got to agree
    He's a real celebrity

    Fine swine, wish he was mine
    What if he's not so big?
    He's some terrific radiant, humble
    Thingamajig pig
    The terrific,.radiant, (Humble x2

  • Isn't it ironic that Zuckerberg doesn't like it when the privacy of FaceBooks IPO is violated when his business model is to gather as much private information about the users of FaceBook as possible. There is an old saying that seems to apply here...

    "What's good for the goose should be good for the gander!"

  • "The banks stand to make $40 million from their deals with Facebook"
    Um, how? Whose ass did they get those numbers from, Mark Zuckerberg's? They had their first negative membership month already, a gigantic competitor just popped up, just about 100% of their customers hate them, and their stocks are overvalued on top of all of that. How is anyone going to make a penny on this bullshit? Correct answer: people who show up to the bankruptcy server auction. I would suggest investing heavily in U-Haul reser
    • "The banks stand to make $40 million from their deals with Facebook" Um, how?

      You seem to be confused. The Banks, i.e., Investment Banks (Not actually banks at all [though JPMorgan Chase has a bank subsidiary), more like large block brokers and mutual fund combo companies) will make somewhere near $40 Million in fees from Facebook and the IPO buyers for their brokerage and marketing services.

  • I would like to purchase 10k worth of shares please.

    Poor unemployed IT worker

  • Coming from the man who said that privacy was a thing of the past, I find this title highly ironic.
  • ... to generate a lot of media buzz and excitement around an IPO.

    It's reality-TV on Wall St.

APL hackers do it in the quad.