It may seem that there is not much in common between the ship Titanic and Facebook, but events over the last 10 days have brought in some dreadful similarities. Exactly a 100 years after the ship?billed as the ?unsinkable? one?got lowered to the depths of the ocean, there came an IPO which everyone thought was just a walk in the park. After all, it was the Facebook IPO. How could it fail?
The biggest technology floatation in history has sunk, much to the dismay of the investors and worse its CEO Mark Zuckerberg is being sued by shareholders. The newly wed champion hacker has not made his presence felt ever since the disastrous IPO, but the fact is there is nowhere to hide.
The shareholders are alleging that Facebook and its lead underwriter Morgan Stanley had not revealed the company?s weak growth forecasts ahead of its public offering. It is also now being said that the $38 listing price was too hot and hence the stock is suffering big time. There is a feeling in hindsight that Facebook?s floatation was too huge?421 million shares worth around $16 billion at the offer price.
Several law firms have said that they were initiating class-action suits against the company and its underwriters. The major contention is that the IPO documents did not reveal that there is a possibility of a dip in revenue growth, and the news reached most investors much after the trading began.
Only a few select clients knew about this and Mark himself saved some $174 million by selling off a part of his stock on the opening day. This has further angered investors.
The Securities and Exchange Commission has started looking into the matter. The US Senate Banking Committee has initiated an inquiry. The American media has been highly critical talking about the greed of the Wall Street and how the average investors get taken for a ride every time. Clearly no investor is intending to press the ?Like? button any time soon.
No doubt, there is tremendous heat in Mark?s kitchen at the moment. But one has to quickly add here that he is not someone who presses the panic button. The guy knows no such thing. If he didn?t know what he was doing, he wouldn?t be here in the first place. Four months after he founded FB, a $10 million offering came his way when he was just 19. In 2005, Viacom offered $75 million. MySpace and News Corp had a visit too. Then Viacom came back with a $1.5 billion offer. Yahoo!
(really!) also tried to pitch for it. Mark did not budge an inch and kept going. He is a man who can wait endlessly. His $20 billion stake in FB make have come down to $17 billion, post the IPO crash, but that?s still a heady amount. The events over the last few days, is unlikely to worry him beyond a point.
The fact is that Facebook founder has never enjoyed being in the limelight. He has always preferred the backstage, but now investors are clamouring for him to come to the forefront and do some explaining. His last appearance in public was when he showed himself up for the Nasdaq opening bell. Clearly, this mishap is not something he bargained for. And more than anything else this will be a test of his personality. Before Facebook became a public company, Mark could afford to sit in one place and do what he does best. There is no one who understands social media better than he does, but now he needs to come out of that cosy room. Clear communication is what he needs to do now ?that?s what millions of people use FB for!