Way to go, Facebook!
I am skeptical of Facebook’s long-term prospects, but as a guy who has worked at his share of Silicon Valley startups, and as a guy who has taken a modest loss on FB by betting on an opening-day bounce, I have got to give them credit: their IPO “flop” means they got it right, and hopefully made the stock market a slightly better place:
1) By setting their price at, or in this case, above what the market will pay, the company’s investors make the most money off their stock. If there’s an opening-day bump, that means they left money on the table for the underwriting bankers to profit from.
2) By being such a “dud” hopefully they dampen future expectations that a hot IPO should “pop” on the opening day. The true value of the stock market is as a mediator of investment. Speculative trading is just white collar gambling.
And unless the company totally implodes before their lock out period, I am not worried about the rank-and-file employees either. In pre-IPO companies employees are typically awarded options at a very modest fraction of the stock’s future public price. Most Facebook employees are probably looking forward to some windfall in the near future; Some will become rich, many others will be able to afford a house on the peninsula, and more still will be able to zero out credit card debt, student or car loans.
Valley companies that want to succeed look out for their employees. Even at an old public company like Cisco, we get to purchase our public stock at a 15% discount, which means the employees get some nice equity action even in a down market. I won’t be crying a river for Facebook employees any time soon.