Facebook IPO: US$ 100 Billion Crime Against Humanity
Mansoor Durrani*
Facebook (FB) Initial Public Offering (IPO) was launched on 18 May 2012 with
unprecedented fanfare. At over $38 per share, the company was valued in excess of US$ 104
billion. The IPO instantly created 800 new millionaires, mostly FB employees and a handful
of early investors. But the stock plunged more than 13% on its debut on NASDAQ wiping
out US$ 15 billion. Within 48 hours, FB founder Mark Zuckerberg married his longtime
sweetheart Pricilla Chan – gifting her a multi-million dollar wedding ring!
421 million FB shares were offered mainly to retail investors. The FB valuation was 3 times
more than the combined valuation of the last 10 technology companies IPOed in the US over
the last 12 months! That valuation was also larger than Ford Motor or Kraft Foods - two of
the largest companies in the world making real products and meeting genuine human needs.
This is not to say tech companies do not benefit the humanity.
There are big-4 technology companies in the Silicon Valley, California. They together make
the Valley a global technological hotspot. Three of them: Apple, Amazon and Google offer
real products and services. They cater to the legitimate needs of our society. FB serves none.
"I am trying to make the world a more open place," says Zuckerberg. Millions like him for it,
but some are now clicking "unlike."
Time spent on FB is proving to be a huge liability for those addicted. A recent survey in UK
blamed FB for nearly a third of all divorces. In India, "Facebook is fast becoming a reason
why many marriages are faltering," said celebrity divorce lawyer, Mrinalini Deshmukh.
"Spending more time, especially at night before bedtime, with friends on Facebook or merely
playing games on the site is no doubt eating into couples' together-time or intimacy," the
lawyer explained in 3 June 2012 Times of India. The Bandra family court in Mumbai is
struggling to figure out where to even send summons to a "wife" who a man says he married
after “meeting” on FB.
A May 2012 survey of individual investors and traders, released by WhisperNumber.com,
showed that 49% think FB is a passing "fad." Apparently the demise of MySpace, Friendster
and other Web services is still on the minds of consumers. An Associated Press-CNBC poll
was based on phone interviews with 1,004 U.S. adults. It was conducted between 3-7 May
2012. Among FB users polled, 30% said they don't trust FB "at all" to keep their personal
information private. And 29% said they only trust FB "a little" in that regard. That's a total of
59% of FB users that trust FB only a little or not at all when it comes to privacy.
David Weidner, a Wall Street Columnist says "The company and its products keep making
fools of us. As consumers, Facebook encourages us to overshare our lives, even though we
know we’ll live to regret it. As investors we are tempted to overbuy, and we are regretting
that, too. It’s as if Mark Zuckerberg is having the ultimate nerd’s revenge: He’s humiliating
all of us and taking our money in the process".
It’s one thing for unholy masses like us to get snookered. It’s quite another for Wall Street
egos to get whacked. But there was Morgan Stanley, whose self-satisfaction in winning the chief underwriting role was only outdone by its humiliation: first, in having to support the
stock by buying it in its first-day trading; and then by giving up and declining to comment as
FB shares sank.
Not just FB and Morgan Stanley who were humiliated on that fateful day of 18 May. It was
the Nasdaq’s turn too. Satisfied at having stiff-armed the New York Stock Exchange by
landing one of the top five IPOs of all time, Nasdaq chief Bob Greifeld went from opening
trading to a 90-plus-minute delay, to utter confusion to apologies and unfilled orders at the
close of the session. “Not our finest hour,” he said, in the understatement of a career. Those
spared from buying FB above US$40 because of a trading glitch might be the only ones who
disagree with him.
Indeed, the only ones who look smart are Zuckerberg, FB's management and their financial
backers. Almost all of them sold out at $38 a share, nearly 20% higher than the original price
expectations. There were few regular people who made fortunes on FB. Its private placement
and exclusive club ensured that Zuckerberg and his backers decided who would get rich and
when.
In many ways, it’s not so much unlike FB itself. FB users thrust everything of theirs out
there: photos, thoughts, likes and dislikes. They share everything. A hundred or so friends,
most of whom miss their updates, ignore them or make stupid comments on them. It’s as if
they’ve devalued their own lives so others can make jokes of them.
At the end of a FB session, there is said to be a feeling of an anticlimax. David Weidner
wrote “We hope for contact and more often than not get silence. We exploit our own privacy
to our friends, advertisers, strangers. We rarely, if ever, make that connection that’s worth the
investment of putting so much of ourselves out there. In the end, it’s clear FB's was the
rare IPO in the markets that catered to that same kind of person, an exclusive sort of investor:
the sucker.”
We’re now less than 20 trading days into FB's life as a public company and the stock has
already lost roughly a third of its value. No wonder FB investors have filed a class action
lawsuit against Zuckerberg, alleging that he had inside information that the company's stock
was overvalued that led to his dumping of shares ahead of their post-IPO collapse.
Eric Jackson, the Houston based founder of Hedge Fund Ironfire Capital predicts FB’s future:
"In five to eight years they are going to disappear in the way that Yahoo has disappeared.
Yahoo is still making money. It's still profitable, still has 13,000 employees working for it.
But it's 10 per cent of the value that it was at the height of 2000. For all intents and purposes,
it's disappeared."
Barely 18 months before this mega crime against humanity, Time magazine chose Mark
Zuckerberg “Person of the Year” in December 2010!
*Trust me, I’m not on FB!