Tuesday, September 04, 2012

Facebook IPO - Not a Debacle, Exactly

The reader's comments in this article are much more insightful than that of the author. Investors are unhappy because they paid too much for Facebook stock in the recent IPO. I get why the investors are disappointed, but for everybody inside Facebook at the IPO, they executed a brilliant financial transaction. They maximized the return for the current stakeholders, and they didn't do anything illegal in the process.

The irony of this kind of a deal, of course, is that one second after the transaction, the people who overpaid you now become your stakeholders. In this way, CFO Ebersman finds himself in a tricky, uncomfortable position. But still, he totally did the right thing and got outstanding results.

Reminds me of the brilliant move Steve Case made, well over a decade ago, locking in much of AOLs excessive valuation by selling to the Washing Post company. I'm pretty sure he knew they were grossly over-paying, but that was hardly his fault or problem.

Like I said, many of the readers seem to get this quite clearly, unlike the author of the article.

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