Remember Facebook? Last night it filed an amended S-1 for its IPO including a bunch of contracts. Those contracts were so boring and bog-standard that … well, this:
SharesPost Financial Corporation completed its auction of 150,000 shares of the Class B Common Stock of Facebook, Inc. on February 8, 2012. A clearing price of $44.00 per share was established at the auction.
Using the 2.33bn shares implied by the “pro forma diluted share count” in its prospectus, that gets you about a $103bn pre-money valuation, or up about $10bn from this time last week. Assuming a constant price/Likes multiple, which is I assume how social networks are valued, that must mean that Facebook is approaching 3 billion “likes” per day.
The fact that you can get, um, weekly market prints for Facebook means that it is in a weird place for a private company, with a certain amount of liquidity and price transparency provided by private marketplaces. Investors who want to get out can, and accredited investors who want to get in also more or less can. So some think that FB is in essence already public, with most of the trappings of public trading for everyone but non-accredited retail shlubs. This is a good example of why that’s not necessarily so. Continue reading »
I started out not really caring about the Facebook IPO except as part of a vague stunt-driven desire to get some shares so I could tell you all that I’d gotten some shares. I now think that that plan was foolish, though I look forward to telling you how I was fleeced by retail brokers who pretended that they’d get me some shares. But as someone with a pretty meh reaction to good corporate governance, I’ve developed a certain fondness over the past, um, six days, for Facebook’s terrible corporate governance, which is laid out in a section of the IPO prospectus – right after the Hacker Way – titled “I’m CEO, bitch,”* and which involves Mark Zuckerberg controlling all decisions for the rest of his natural life and any cryogenic extension thereof.
CalSTRS, however, isn’t so sure:
“We are in fact in the beginning stages of engagement with Facebook” over governance issues, Ricardo Duran, a spokesman for the pension fund, said in an interview. “We are planning to send them a letter.”
Well that’s just super. Continue reading »
How much is Facebook worth? Good God do I not care. Go ask a prediction market. Here’s one:
Another choice is the delightfully named bookmaker Paddy Power, which also puts it at $40, plus or minus $5, which seems pointless, though unlike SharesPost Paddy Power will also let you bet on whether Bono or Bill Gates will ring the opening bell for Facebook’s first day of trading. (Eduardo Saverin doesn’t seem to be an option though wouldn’t that make you just cry?) Forty bucks is a $93bn pre-money equity value if you use Facebook’s pro forma diluted share count, and why not.
Markets for predicting the price of publicly listed securities are … strange, I guess, depending how you slice it. You could argue that in the ordinary course “markets for predicting the price of publicly listed securities” are called “stock markets.” But SharesPost, and its peers like SecondMarket, are of course not really prediction markets though that might be their highest and best use for the next three months. They’re quasi-public exchanges that allow employees and investors to get liquidity and allow dubiously accredited dopes like me to buy shares of unlisted companies relatively easily, though they are also “used car markets where buyers aren’t allowed to check what’s under the hood,” according to some finance professor. My used-car purchasing days were not distinguished by a deep knowledge of automotive engineering and if my first post-college car had a drunken hamster on a rusty wheel under the hood I would probably not have noticed at the time of purchase.* Continue reading »
I’m not the only person who noticed that Mark Zuckerberg is going to have more than the usual amount of control over Facebook (Facebook Facebook Facebook), both unto his grave and beyond. As a conceptual matter I’m kind of down with that though I’m not going to, like, buy shares in the IPO or anything.* But my basic take is that, if you’re going to buy stock in in a poking machine that makes about a penny per user per day, you should be willing to trust Mark Zuckerberg. Because if you were the inventor of Facebook, you would have invented Facebook, or something.
The alternative to giving a hoodied 27-year-old complete control over all aspects of a multibillion dollar business is to have a team of professional managers being all professional and managing by committee and checking each others’ work. It is not clear what is better. I suspect Facebook would not be a $100 billion asset today if it had sold to Yahoo in 2006 though, also, no one has ever accused Yahoo of being professionally managed. But the point is that those are two distinct styles and there are arguments for both. Professionalism has much to recommend it but so does complete domination by one visionary; for instance, founder dominated firms outperform the market.
On the other hand there is a downside to dominant visionaries, as some (non-Zynga-based) hog farmers now know all too well: Continue reading »
Facebook!
One thing about Facebook is that Facebook doesn’t need the money that Facebook is raising in the Facebook IPO that Facebook just filed. (Did you hear?) It’s got almost $4bn in the bank and it can’t even be bothered to pretend that it’s got any plans for what to do with more:
The principal purposes of our initial public offering are to create a public market for our Class A common stock and thereby enable future access to the public equity markets by us and our employees, obtain additional capital, and facilitate an orderly distribution of shares for the selling stockholders. We intend to use the net proceeds to us from our initial public offering for working capital and other general corporate purposes; however, we do not currently have any specific uses of the net proceeds planned.
And while the selling shareholders undoubtedly will be happy to be able to sell in the open market, they can kind of do that now, with robust SharesPost and SecondMarket trading at high-eleven-figure valuations. Basically Facebook is IPOing because it’s got so many shareholders that it is legally required to register so might as well raise a few yards of rainy-day money while it’s at it.
When that’s your posture – and, to be fair, when people are beating down your door to buy your stock – you can be pretty, pretty cavalier with shareholder rights. What that means here is a two-class share structure (insiders get 10 votes per share, the public gets 1 vote), a board of directors that is not required to be independent, and Mark Zuckerberg controlling 57% of the voting power of the shares (while only owning 28%) via really quite all-encompassing voting agreements with current investors, some of which last until he dies. If your theory of public corporations is “they should be controlled by and for the benefit of the public shareholders,” this may trouble you. If your theory is “I’d follow Mark Zuckerberg anywhere,” then, carry on.
Other things to know or avoid knowing: Continue reading »
If you’ll allow, a quick manifesto: Continue reading »
I really hope that Facebook is just faking us all out with this whole “we’re IPO’ing on Wednesday” thing that they haven’t said, in part because I have yet to park $100k of the Dealbreaker slush fund/Bloomberg budget in Facebook shares on SharesPost. But just in case they actually do something next week let’s analyze the hell out of everything so we can be proven wrong by the filings. Okay? Okay.
One thing to over-analyze is that presumptive lead-left bookrunner Morgan Stanley’s shares did or did not go up on the news that Facebook will or will not file next week and MS will or will not be the lead bookrunner. One reason for the market to shrug off this quasi-news is that Morgan Stanley won’t actually make any money on the deal since Faceook is planning to punch everyone in the face on fees: Continue reading »
