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May 21, 2012

Comments

Jeff Shattuck

For what it's worth, "insiders" is a loose term. If you are Facebook employee or officer, you had to sign a lock-up agreement, otherwise you were free to sell. The fact that big shareholders bailed straightaway tells me that FB will not be going up anytime soon. As for underwriters propping up shares, that's what they do. And they can't afford to do it forever...

Dave

Not sure the lock-up agreement worked in this case. Zuckerberg himself sold a bunch of shares on day one.

And as for underwriters buying the stock that should not be allowed. It's an admission that they priced it wrongly.

I agree with this guy...a thorough investigation is needed. I also think that the system we lived under for years at Grey, with two classes of stock, which allows Zuckerberg to control all the voting power while also making vast amounts of money from selling stock that does not carry the same voting power is, frankly, criminal. Who would ever think that Ed Meyer and Zuck had anything in common. Turns out they both believe in having your cake and eating it too.

Jeff Shattuck

Well, I did some reading about Facebook's IPO and, yes, Zuck sold stock. I didn't know that was legal, but it is, you just have to get your investment bank to let you. The stock was priced to ensure the greatest possible payout for investors up to the IPO; not cool, but legal. What's not legal is the fact that FB may have hid the true state of revenue/profit growth; if they are found to have done that, they will have to pay a fine, but it will be a pittance. As for classes of stock, some companies mandate all common or nothing, but most have preferred shares and having invested in a few private companies the whole preferred thing sucks, unless you're preferred! Mostly it's jut new money coming in during tough times and getting a better deal than the old money. Anyway, what fascinates me the most about the Facebook IPO is that they went about it in a very old school, unimaginative way. Would have expected some sort of twist.

Dave

“I think there is a lot of reason to have confidence in our markets and in the integrity of how they operate, but there are issues that we need to look at specifically with respect to Facebook,” Securities and Exchange Commission Chairman Mary Schapiro told reporters. - msnbc.com

Zuck's inexperience showed. He is the CEO and the banks are his advisors - he didn't need to take all their advice. Too many shares, too high a price and dodgy goings on regarding the truth about Facebook's earnings projections. It may be a small fine, yes, or it might bring about some new regulations and everyone on Wall Street will blame FB. I happen to think that would be a good thing. And the fine should be gargantuan!

Most people now access Facebook via mobile devices but it has yet to have a way to show ads to those users. That's all anyone needs to know to know this thing is going WAY lower.

Also we are not talking "preferred shares" - they usually carry no voting rights but have other benefits . This is the FB system:

"Definition of 'Class B Shares'
A classification of common stock that may be accompanied by more or fewer voting rights than Class A shares. Although Class A shares are often thought to carry more voting rights than Class B shares, this is not always the case. Companies will often try to disguise the disadvantages associated with owning shares with fewer voting rights by naming those shares "Class A", and those with more voting rights "Class B"."

Like I said - same system Grey Global Group operated prior to the WPP purchase. They could have given me all the stock they liked and I could never have had even the slightest impact on the running of the company. It's how you become a public company without the public having any influence. Should simply be outlawed.

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