Facebook’s I.P.O.: The Party Fizzles
Joe Kernan, who was also around in the late nineties, refused to put on a Mark Zuckerberg-style hoodie, which somebody had thrown onto the set. Good for him, you may say: refusing to partake in this Barnum & Bailey show. Not quite. Kernan’s hesitancy was based on a dislike of putting on an item that somebody else had worn, he explained.
Thank goodness Jim Cramer—yes, that Jim Cramer—popped up to inject a bit of skepticism and sanity. “I am just concerned that the public will get burned again,” he said shortly before Zuck himself, live from the hideous corporate campus in Menlo Park that serves as Facebook’s HQ, pressed a bell to start the day’s trading on the Nasdaq. The great man-boy was wearing his hoodie, of course, and it looked like he’d had his hair cut for the occasion, or perhaps for his twenty-eighth birthday, which was earlier this week. He didn’t say anything, but he received a nice bear hug anyway from Sheryl Sandberg, his C.E.O. and surrogate mother. From below the hastily erected stage, a scrum of geeks who were about to get rich gave him a loud cheer.
That was about that. It looked a bit like an encore by a second-tier college rock band at a sparsely attended music festival. To get across the momentousness of the occasion to their viewers, the CNBC anchors were forced to rely on words rather than pictures. “We’re witnessing a lot of American wealth getting created,” said Carl Campanile, a CNBC regular, who was on the ground in California. “It opens a new chapter, an exciting chapter, for business in this country,” offered David Faber, who was trying to get into the spirit of things from Englewood Cliffs. It was left to Melissa Lee, Faber’s co-host, to summon up a sentence fully commensurate with the occasion. “Mark Zuckerberg has accomplished the substance of the American dream,” she intoned.
In the scheme of things, it was all pretty harmless stuff, and at least some of it had the merit of being true. To those who say America is in inexorable decline, the existence of Silicon Valley, and the college-dorm-to-corporate-park success stories it generates on a fairly regular basis, is the great counter-argument. You can’t replicate Facebook in a Guangdong sweatshop. Where is the French Zuckerberg, or even the French Sandberg? And why even now, despite the rise of Mumbai, Silicon Fen, and other technology clusters, do so many innovative internet companies—Zynga, Pinterest, Instagram—start out or migrate to the Bay Area?
Sadly, none of this has any bearing on whether Facebook is worth a hundred billion dollars—roughly what it would be worth at the issue price of $38. Shortly before 11 A.M., the signs were that “FB” would open at about $45, sharply lower than many people had expected. At eleven, CNBC’s monitors were showing $42, just four dollars above the issue price—an indication that investors were balking at paying a big premium over the offer price. Fifteen minutes later, the stock still hadn’t opened. “I’m getting nervous,” Jim Cramer stammered. He wasn’t the only one. At 11:25, the Wall Street Journal reported that many traders were trying to cancel their electronic orders and having trouble doing it. “Did Nasdaq break?” Henry Blodget, who had gone back to his day job, tweeted. No, it didn’t.
At 11:30, the stock opened at $42, jumped up to $43, fell back $42—and kept falling, back to $40. “For market sentiment, this is not going to be positive,” said Simon Hobbs, the network’s resident Brit. Melissa Lee was equally crestfallen: “Forty minutes ago, I don’t think anybody thought $40,” she said. David Faber had been working the phones, and he reported that his sources had told him the stock might well fall below the issue price of $38, which would be a big embarrassment to the banks underwriting the deal, led by Morgan Stanley. “The big story is that Facebook, the social network, is now a public company,” he said. “The smaller story is that after five minutes, it’s only up six per cent.”
At 11:50, the stock hit the issue price of $38, prompting the underwriters to enter the market and prevent it falling any further. On CNBC, at least, the Facebook party was over. Out in Silicon Valley, things looked quite a bit different. We weren’t back in 1999, after all, but Facebook was, indeed, a public company—one valued at more than a hundred billion dollars. Zuckerberg was worth nearly twenty billion; Sandberg more than a billion. Eduardo Saverin, the Facebook co-founder who gave up his U.S. citizenship to avoid paying taxes on his windfall, was worth $2.7 billion. A bunch of venture capitalists, including a Russian oligarch and an Irish rock star, had made out like bandits. One of them, Roger McNamee, Bono’s business partner, popped up on the screen to say, “I’m very, very bullish about the long run.”
The insiders had done very, very well. Now we’ll see how the public investors fare.
src:~http://www.newyorker.com/online/blogs/johncassidy/2012/05/facebooks-ipo.html
