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Facebook Orders Banks To Stop Leaking IPO Details

Unknown Lamer posted more than 2 years ago | from the zuckerberg-will-break-your-legs dept.

Businesses 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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banks make only $40 million? (0)

Anonymous Coward | more than 2 years ago | (#38948401)

that doesn't compute...

Re:banks make only $40 million? (2)

NotQuiteReal (608241) | more than 2 years ago | (#38948415)

Just what I was thinking - .04% seems light.

Re:banks make only $40 million? (2)

zill (1690130) | more than 2 years ago | (#38948659)

The IPO will raise $5B, so it's 0.8%. You're probably confusing the market cap with the IPO size.

Re:banks make only $40 million? (1)

MaskedSlacker (911878) | more than 2 years ago | (#38949185)

No, the summary did that for them.

Re:banks make only $40 million? (3, Informative)

Fnkmaster (89084) | more than 2 years ago | (#38949293)

Still sounds crazy low. Banking fees for IPO deals are generally 7% for "normal" sized deals (a few hundred million), and around 3% for large deals. You'd expect the fees for a $5B IPO to be around $150M. If they are doing it for less, it's because the value of the prestige and marketing value they get from this deal is worth a fortune to them.

Re:banks make only $40 million? (0)

Anonymous Coward | more than 2 years ago | (#38949623)

Well... there are like 4 banks. So... each of them pocketing 40 million would be about right then?

Re:banks make only $40 million? (1)

Luckyo (1726890) | more than 2 years ago | (#38950369)

This however is one of those "deal of the decade" deals, which allows for a whole different level of competition between banks. 40 million USD is no pocket change, even for them, especially with marketing value of "we can pull a deal this huge off well".

Re:banks make only $40 million? (4, Interesting)

Shavano (2541114) | more than 2 years ago | (#38949747)

It's the market capitalization that's crazy. Facebook revenue was about 4 billion last year. No company can support a 20:1 price/sales multiple. Multiples that high scream scam.

But it's worse than that. Zuckerberg is keeping control of the voting shares in a way that allows the other investors zero say in how the company is run. He will appoint the directors. He will tell them what to say. He will decide all by himself how much he spends on development and how much on salaries including his own and how much he returns to investors in dividends or stock buybacks.

Re:banks make only $40 million? (2)

Sir_Sri (199544) | more than 2 years ago | (#38949999)

Only sort of though.

Any IPO is based on projected future revenue. I've said other places, facebook with 800 million users is running out of users that will generate much money, and it's hard to know how much money they can get per users. Sure, there are a couple of billion people in africa, india and china that don't have facebook, but selling seeds for pennies to them isn't really advertising revenue of much value. Then there's the very young and very old, who as a demographic won't ever have facebook pages. Lets say, for sake of argument they get up to 1 billion users, that would be half of total internet users, and some of those are going to be counted multiple times (phones, and computers and home and office for example). So they're getting 4 dollars per user right now, give or take (remember they did grow by a couple of hundred million users in the last year so it's hard to get an exact number). From a billion users there's not much more room 'up'. That's most of the youth of north america, the EU, south america, japan, australia, that sort of thing, and all the rich kids from the rest of the world. But they're valuing at 100 billion, which is say 100 dollars per person. That's a bit of a stretch from their current value *but* and it's a big but, what do they intend to do with the 5 billion dollars in cash they're asking for?

Think about what services they could integrate into facebook that could generate a crap load of revenue. VOIP chat, TV and movie rental that sort of thing, music streaming, search, they could just use their backend technology to help deliver a cloud type service to other companies that would generate revenue etc. Suddenly there are a whole lot of options for things that *could* generate money. Google only has about 1 billion users themselves (2 billion internet users total, google has 65% of the search market which might be that google users search more than non google users or something, their unique visitors per month peaked in may 2011 at just over 1 billion), and they are generating 38 billion dollars a year in total revenue. Now, admittedly, google is a different baby. If I'm looking for a plumber advertising plumbing services where I'm looking is a good idea. If I'm trying to find out where this years christmas party for my GF's family is, probably I'm a lot harder to target ads at.

So that's the point of an IPO, they need cash to grow the business, hopefully into things that will make money. Whether or not they can justify 100 billion dollars as a market cap is anyone's guess, but that's probably also priced based on the fact that there have been a lot of private sales of facebook shares since they waited so long to go public (in other words the typical fervor of future value is already priced in at that level). And even then, assuming they don't implode (which with their relatively healthy, i.e. profitable, balance sheet) they can still do well if the stock dives a bit. 4 billion dollars a year in revenue when your only revenue is sketchy ads and 'facebook points' (which mostly go to 3rd parties) seems like they have a lot of room to grow.

Re:banks make only $40 million? (0)

Anonymous Coward | more than 2 years ago | (#38951275)

and some of those are going to be counted multiple times (phones, and computers and home and office for example).

Yes, only a slashdotter would think of friending their phone, computer, home and office on facebook. :P

Re:banks make only $40 million? (1)

turkeyfeathers (843622) | more than 2 years ago | (#38952545)

Any IPO is based on projected future revenue. I've said other places, facebook with 800 million users is running out of users that will generate much money, and it's hard to know how much money they can get per users.

They have ways of making money from you sheep that you haven't yet dreamed of.

Re:banks make only $40 million? (0)

Anonymous Coward | more than 2 years ago | (#38950569)

>No company can support a 20:1 price/sales multiple

By that reasoning, any company that has not yet made its first dollar is inherently wortheless (since a valuation above exactly zero dollars would put it to a price per sales ratio in the stratosphere).

Please, the next time you found a company, but before you make your first sale, do let me buy 20% of it for ten bucks: this is a massive overvaluation of your company. I will let you keep the eighty percent so that you have an interest in turning it around, but, as you say, it's money out the window for me, not a very rational offer to make you...

Re:banks make only $40 million? (1)

ediron2 (246908) | more than 2 years ago | (#38952621)

Yeah, your gedankenexperiment on GP's next company 'before you make your first sale' is **totally** the same thing as saying a 20:1 p/s ratio for *FACEBOOK* is too big. Facebook's so tiny they'll definitely **GROW** to fill that ratio. Just like Groupon. /sarcasm

Personally, I can imagine ways that they can grow into the ratio. Per-user revenue is much easier to alter than their customer count, obviously. Whether they do or not hinges on tapping into revenue streams.

Deciding whether they will succeed is the speculative nature of the market.

Re:banks make only $40 million? (1)

Anonymous Coward | more than 2 years ago | (#38953839)

Yeah because "unknown startup with zero sales" and "company that's been around for the better part of a decade, has huge name recognition, and already makes millions of dollars" are exactly the same thing.

Re:banks make only $40 million? (1)

gl4ss (559668) | more than 2 years ago | (#38952627)

*But it's worse than that. Zuckerberg is keeping control of the voting shares in a way that allows the other investors zero say in how the company is run.*

kinda like apple then.. what I'm interested is if he is going to pay dividends or not - to set it apart form apple mainly as an investment.

Re:banks make only $40 million? (5, Insightful)

Xacid (560407) | more than 2 years ago | (#38953869)

But it's worse than that. Zuckerberg is keeping control of the voting shares in a way that allows the other investors zero say in how the company is run. He will appoint the directors. He will tell them what to say. He will decide all by himself how much he spends on development and how much on salaries including his own and how much he returns to investors in dividends or stock buybacks.

Good. Companies ran by boards in the interest of shareholders and not the business (not mutually inclusive) typically have a way of fucking over the business, the workers, and the product by driving incredibly hard for cheaper and faster. I think Zuckerberg has done a brilliant move with this. Other than simply retaining control he's also showing shareholders that the direction of the company is stilll in his hands - the same leader that managed to get 10% of the world's population using his product(I read this figure somewhere recently). Love it or hate it - there's something to be said for it.

Re:banks make only $40 million? (0)

Anonymous Coward | more than 2 years ago | (#38954207)

This is not a big deal. He may want "control" of it because he is young and doesn't know any better. However, when the markets speak, he will listen. Remember that guy by the name of Bill Gates. He ran a small company called Microsoft in the same way for a little while and found out he couldn't do it all by himself, and still be a leader who wants to be "social networking OS" or whatever the hell they calling facebook now a days.

Except it's not $100B. (2)

GuruBuckaroo (833982) | more than 2 years ago | (#38948411)

It's $5B, isn't it? I mean, come on, basic facts too much to ask?

Re:Except it's not $100B. (5, Informative)

SadButTrue (848439) | more than 2 years ago | (#38948527)

$5B is the amount FB will pocket with the sale of shares at the IPO price. The $100B number is the market value of all share @ the ipo price, give or take. I have heard as low as $75B.

Re:Except it's not $100B. (3, Informative)

blueg3 (192743) | more than 2 years ago | (#38948867)

Right. The public offering is $5B in shares. The market cap of the preexisting shares is not a part of the public offering. It's often the number bandied about during an IPO, but it is not the actual size of the IPO.

Re:Except it's not $100B. (0)

Anonymous Coward | more than 2 years ago | (#38948581)

Financially inept or just not well read on this subject?

Re:Except it's not $100B. (0)

gparent (1242548) | more than 2 years ago | (#38948787)

Apparently yes, given your reply.

Advice: no stock price pop (5, Interesting)

mveloso (325617) | more than 2 years ago | (#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:Advice: no stock price pop (2, Insightful)

Anonymous Coward | more than 2 years ago | (#38948441)

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?

Re:Advice: no stock price pop (1)

t4ng* (1092951) | more than 2 years ago | (#38948805)

mp3.com?

Re:Advice: no stock price pop (3, Interesting)

nedlohs (1335013) | more than 2 years ago | (#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...

Re:Advice: no stock price pop (0)

Anonymous Coward | more than 2 years ago | (#38951561)

Any "pop" that occurs will be reversed very quickly. Facebook isn't worth $100 Billion and never will be, Expect the shares to be trading at 35%-50% of their IPO value this time next year.

Re:Advice: no stock price pop (0)

Anonymous Coward | more than 2 years ago | (#38949011)

Yeah, but the point is, those expectations should take the wild overvaluation into account -- the whole point of an IPO is to sell stock for cash, and we all know the second part of "buy low, sell high"...

Re:Advice: no stock price pop (1)

timeOday (582209) | more than 2 years ago | (#38948583)

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

Re:Advice: no stock price pop (0)

Anonymous Coward | more than 2 years ago | (#38949171)

2 reasons: That has to be done perfectly to be legal (the financial places like that it is hard) and that it hurts the first people who buy it because it affects the price too low for a few days (which the financial places don't like, they want stocks to act like fireworks with escape pods; they shoot up fast, the buyer bails out and then the stock self destructs, putting on a good show)

Re:Advice: no stock price pop (1)

frosty_tsm (933163) | more than 2 years ago | (#38948719)

Not necessarily.

If an IPO goes out and the stock stays near flat or slumps, it gives it bad momentum. Example: Pandora

Re:Advice: no stock price pop (0)

Anonymous Coward | more than 2 years ago | (#38949063)

So? The company going public has their money. The price is staying steady, that means the market has agreed on a price. Nothing wrong with that.

Re:Advice: no stock price pop (2)

rednip (186217) | more than 2 years ago | (#38948845)

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 ability for current owners to 'cash out', or establish credit on their ownership, and clearly they're hoping for the best price always. Sure the company has an interest in making the strike price reasonable close to reality, but one shouldn't underestimate the value of a big pop would have on publicity (even facebook still likes to be in the news).

A bit more like how it actually works (0)

Anonymous Coward | more than 2 years ago | (#38949265)

Switching over from the realm of complete fantasy:

- Stock valuation is a highly imprecise exercise because it is driven by factors that have a great deal of uncertainty attached to them. Unless you're going to come up with some highly specific theory for what the company's earnings are going to be twenty years from now, your valuation model will at some point include a growth rate element. This growth rate affects company value to an extreme degree. The price you choose as an entry price will naturally have one implied growth rate, but if the marketplace feels the true growth rate differs by 1-2% in either direction then the price will immediately adjust enormously to reflect this.

- That naturally kills off any clauses where the underwriter pays the company. It's a pipe dream to think any firm would do business it considers likely to be unprofitable, so the alternative is that the "basic fee" is increased 10-fold and you get a punishment clause on top of that.

- It actually doesn't affect Facebook that much if the price goes from 100 to 180. This is only 5% of the shares, remember? Total value of the company coming in at 2% lower. That's a day's fluctuation for many firms.

- As for why you have a clear interest in underpricing an IPO, there's a nice article here: http://dealbook.nytimes.com/2011/05/27/why-i-p-o-s-get-underpriced/

Re:A bit more like how it actually works (1)

mveloso (325617) | more than 2 years ago | (#38950173)

There's imprecise, and there's "we fucked up." My google-fu is weak tonight and I can't find a study showing different sector IPO first-day results. But there's this:

http://abcnews.go.com/Technology/wireStory/ipo-stocks-fared-15525164#.TzDCYJjRUyE [go.com]

Linkedin: priced at $45, closed at $94.25. Linkedin got screwed out of $45/share.

Zygna: priced at $10, down 5% on first day. Excellent! Zygna didn't lose anything.

Jive: priced at $12, closed up 25%. Not bad for the underwriters and their freinds.

Of course nobody would take the deal - because the game is fixed due to conflicts of interest. The underwriters have a definite conflict of interest - they flog the shares to their customers, and why would they want their customers to take a hit on the first day? Who doesn't want a nice juicy no-risk gain for their brokerage clients and buddies?

And plus, everybody wins - just some people win more than others. That's why Google did when it did when it IPO'd, but that's a game that nobody really wanted to play; they had to, because of the money.

It'd be the same as FB, if they wanted to play.

Re:Advice: no stock price pop (3, Insightful)

quarterbuck (1268694) | more than 2 years ago | (#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.

Re:Advice: no stock price pop (1)

gl4ss (559668) | more than 2 years ago | (#38952683)

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.

Re:Advice: no stock price pop (1)

bloodhawk (813939) | more than 2 years ago | (#38950295)

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.

Re:Advice: no stock price pop (0)

Anonymous Coward | more than 2 years ago | (#38951891)

Yes, it is so easy to accurately qualify (to within 10%) pure speculation, mixed with a little reality,

Re:Advice: no stock price pop (1)

metlin (258108) | more than 2 years ago | (#38954857)

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 in the short term, could affect the overall valuation in the long term.

Apparently... (2)

TWX (665546) | more than 2 years ago | (#38948417)

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

Re:Apparently... (5, Funny)

Formalin (1945560) | more than 2 years ago | (#38948595)

The banks posted it on facebook, and thought they had done so privately. Apparently not. I guess that 'no privacy' sword cuts both ways, eh zuckerberg?

A bit too late ? (0)

Anonymous Coward | more than 2 years ago | (#38948421)

As most of the important information is already out or is just me ?

Why? (1)

Anonymous Coward | more than 2 years ago | (#38948439)

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

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

Re:Why? (2)

LandDolphin (1202876) | more than 2 years ago | (#38948619)

I shouldn't reply to a AC, but here I go:

People use the website. Selling Ads, they are able to generate an income/profit.

Re:Why? (0)

Anonymous Coward | more than 2 years ago | (#38948733)

Actually even sheeples like me are getting tired of FB. I give another couple of years and I am one of the herd.

Re:Why? (2)

NemoinSpace (1118137) | more than 2 years ago | (#38949101)

they don't use meta moderation?

Re:Why? (0)

Anonymous Coward | more than 2 years ago | (#38952883)

US Govt Intelligence.

but how? (1)

Anonymous Coward | more than 2 years ago | (#38948457)

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 ;^) ;^(

Re:but how? (-1)

Anonymous Coward | more than 2 years ago | (#38948741)

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 ;^) ;^(

I'll tell you another thing about those "one percenters" you apparently don't know.

They created the division between "one percenters" and "ninety-nine percenters". Just like they created the BIG FUCKING DEAL that is rich/poor, black/white, theist/atheist, natural-born-citizen/illegal-immigrant, democrat/republican, and back further in the past communist/capitalist, protestant/catholic, and witch/old-woman.

Divide and conquer. Just ask yourself who runs the media that even allowed you to know about Occupy Wall Street and the One Percenters. Did you really think they would give loud national coverage to something they couldn't spin in their favor, that didn't serve their interests? No. The things they really don't want, those things don't appear in the prime-time news. Things like homeschooling, citizens who use guns to defend themselves, proposals to shrink the power and size of government, representative currency backed by precious metals, precisely how the mortgage crisis happened, the discrepencies between the official explanation of 9/11 and the actual observed evidence that contradicts it, etc.

Re:but how? (1)

Anonymous Coward | more than 2 years ago | (#38948819)

Holy good lord I didn't know you could cram 3 whole boxes of tinfoil on your head to make a hat, but I salute you, sir, you have done it!

Re:but how? (1)

KlomDark (6370) | more than 2 years ago | (#38949289)

Normally, yes. But in this case (Occupy) it's pretty clear the MSM ignored it completely until the Nooscape was so overflowing that they had no choice.

However... (1)

Anonymous Coward | more than 2 years ago | (#38948477)

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.

Banks reply ... (5, Funny)

PPH (736903) | more than 2 years ago | (#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.

Re:Banks reply ... (3, Funny)

game kid (805301) | more than 2 years ago | (#38948643)

If you do that again, I swear I'll try to remove you from the public offering but use the wrong page and just hide you from it instead!

--Mark Zuckerberg, a.k.a BiZ MARKie

Re:Banks reply ... (1)

Shoten (260439) | more than 2 years ago | (#38949601)

They won't be that courteous. Instead, they'll do it more like Zuckerberg would.

"Privacy is dead...bitch."

SEC filings public documents? (4, Insightful)

frdmfghtr (603968) | more than 2 years ago | (#38948515)

Aren't SEC filings like this public documents?

Re:SEC filings public documents? (3, Informative)

Anonymous Coward | more than 2 years ago | (#38948551)

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.

Re:SEC filings public documents? (1)

residieu (577863) | more than 2 years ago | (#38949079)

Why does that matter? The company isn't public yet, so finding out news a day early doesn't help anyone.

Re:SEC filings public documents? (4, Informative)

quarterbuck (1268694) | more than 2 years ago | (#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.

Re:SEC filings public documents? (1)

fred911 (83970) | more than 2 years ago | (#38948759)

Sec filings are available on to the public thru edgar.

Re:SEC filings public documents? (2)

Shoten (260439) | more than 2 years ago | (#38949615)

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 disclsosure violates NDAs that are always in place. Furthermore, engaging in any trading based on such information (if it leaks or you have access to it) is considered insider trading and is illicit.

Oh The Irony (5, Funny)

enoz (1181117) | more than 2 years ago | (#38948529)

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

Opt-out (1, Funny)

Anonymous Coward | more than 2 years ago | (#38948531)

Maybe Facebook should adjust its privacy settings.

Privacy and Facebook. Hmmmm. (3, Insightful)

girlgeek54 (806824) | more than 2 years ago | (#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.

Facebook - the new IPO model (5, Insightful)

cutinf (1261120) | more than 2 years ago | (#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.

Re:Facebook - the new IPO model (0)

Anonymous Coward | more than 2 years ago | (#38948613)

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.

The good news is that no one that's a part of John Q Public has to purchase the stock on the first day if they feel it's overvalued. If the P/E of the stock is 120 and its PEG is high, I don't think "Wow, I need to get in now!" I think quite the opposite.

Re:Facebook - the new IPO model (1)

inputdev (1252080) | more than 2 years ago | (#38948669)

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.

Re:Facebook - the new IPO model (5, Interesting)

cutinf (1261120) | more than 2 years ago | (#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.

Re:Facebook - the new IPO model (2)

smellotron (1039250) | more than 2 years ago | (#38949403)

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 the pain if someone's only 401k (or otherwise pre-tax retirement fund) option is high-risk funds that would invest in such an IPO, but I must question how common that is.

Re:Facebook - the new IPO model (1)

tgd (2822) | more than 2 years ago | (#38952355)

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.

Re:Facebook - the new IPO model (0)

Anonymous Coward | more than 2 years ago | (#38949115)

Well John Q Public is free to short the bitch and collect that way. Then buy when it hits the bottom.

Re:Facebook - the new IPO model (1)

ceoyoyo (59147) | more than 2 years ago | (#38949417)

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.

Facebook valuation MAY drop post IPO... (0)

Anonymous Coward | more than 2 years ago | (#38950499)

Public will lose their money, since data is increasingly being forbidden by govt regulation(present & future) rules to be miss-used in many countries. So Facebook valuation MAY drop post IPO & public investors MAY loose money.

even worst... (1, Funny)

acjacinto (1170951) | more than 2 years ago | (#38948561)

disobeying Mark Zuckerberg could mean "unfriending" you on Facebook

Financial insiders (0)

Anonymous Coward | more than 2 years ago | (#38948713)

Don't worry, the insiders will still get the information.

Lesser of Two Evils? (3, Interesting)

conark (871314) | more than 2 years ago | (#38948717)

Actually, this is pretty ironic considering that Zuckerberg wants everything to be public. Now, we know the guy has limits.

Gordon Gecko... (3, Insightful)

actionbastard (1206160) | more than 2 years ago | (#38948793)

It's all about bucks, kid. The rest is conversation.

Why no auction? (2)

hawguy (1600213) | more than 2 years ago | (#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:

        http://online.wsj.com/article/SB125045821555835141.html [wsj.com]

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.

Re:Why no auction? (1)

larry bagina (561269) | more than 2 years ago | (#38949111)

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!).

Re:Why no auction? (1)

russotto (537200) | more than 2 years ago | (#38949129)

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.

Re:Why no auction? (2)

quarterbuck (1268694) | more than 2 years ago | (#38949377)

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 price of the company.

waaaaaaaaaahhhhhaaaaaa.. go away cry baby! (2)

rec9140 (732463) | more than 2 years ago | (#38948949)

", 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 company from board to other items which means Der Furher will decide.

Largest since? (0)

Anonymous Coward | more than 2 years ago | (#38949017)

They say this will be a $100 billion IPO, then they say it's the largest since Google's $1.7 billion. So it's MUCH bigger than Google's. Does the author not know how that phrase works? When you say this is the largest since X, X is supposed to be bigger than this. Otherwise you go further back to find something bigger, or say it's the largest ever.

Re:Largest since? (1)

nprz (1210658) | more than 2 years ago | (#38950415)

ref [wikipedia.org] : Google's initial public offering (IPO) took place five years later on August 19, 2004. The company offered 19,605,052 shares at a price of $85 per share.[46][47] Shares were sold in a unique online auction format using a system built by Morgan Stanley and Credit Suisse, underwriters for the deal.[48][49] The sale of $1.67 billion gave Google a market capitalization of more than $23 billion.[50]

So Facebook is getting them $5b, for a value ranging from $50b to $100b. Google was $23b. So Facebook could be 2-4x what Google was.

On Privacy (1)

griffjon (14945) | more than 2 years ago | (#38949067)

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.

frist p"sot (-1)

Anonymous Coward | more than 2 years ago | (#38949103)

Juliet Are together Big picture. What Apple tto. No,

Oh dear (3, Funny)

Dunbal (464142) | more than 2 years ago | (#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?

Is facebook worth $100B? (1)

Anonymous Coward | more than 2 years ago | (#38949223)

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.

Fiduciary Duty (1)

speedplane (552872) | more than 2 years ago | (#38949315)

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.

Re:Fiduciary Duty (0)

Anonymous Coward | more than 2 years ago | (#38949583)

No. We need less regulation. Facebook should be legally allowed to auction its stock online to anybody willing to buy a share, without being legally required to even speak to Goldman Sachs which will just skim 10% off the top anyway.

Zuckerberd's Famous Pig (1)

KlomDark (6370) | more than 2 years ago | (#38949335)

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)
Zuckerberg's x5
Zuckerberg's famous pig

Ironic! (1)

wfstanle (1188751) | more than 2 years ago | (#38949401)

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!"

slight correction (1)

slashmydots (2189826) | more than 2 years ago | (#38949505)

"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 reservations and plane tickets.

Re:slight correction (1)

glodime (1015179) | more than 2 years ago | (#38949593)

"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'll take 10k worth please (1)

NetNinja (469346) | more than 2 years ago | (#38950287)

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

Sincerely
Poor unemployed IT worker

Ironic (1)

Yvanhoe (564877) | more than 2 years ago | (#38950767)

Coming from the man who said that privacy was a thing of the past, I find this title highly ironic.

Fast fall. (0)

Anonymous Coward | more than 2 years ago | (#38951159)

Quicksilver is what pops into my mind. The harder Facebook starts squeezing their users for money, the faster they disappear.

To date, no social media company has survived itself, not one. Everyone we loved and used is gone. Facebook already shows serious signs of loosing users and users that just dont use its service anymore. This makes the pressure on the remaining users harder per buck. Thus more jump ship and the process looks like squeezing quicksilver.

Nothing like a little cooked-up drama... (1)

EmagGeek (574360) | more than 2 years ago | (#38951401)

... to generate a lot of media buzz and excitement around an IPO.

It's reality-TV on Wall St.

Call the SEC (0)

Anonymous Coward | more than 2 years ago | (#38953243)

Zuckerberg should have complained to the SEC and then used a different, more reputable, bank.

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