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One thing I don't understand is why the media portrays Facebook as "botching" its IPO. If anything, didn't the company make out with a better deal than their ma

One thing I don't understand is why the media portrays Facebook as "botching" its IPO. If anything, didn't the company make out with a better deal than their market value? How is this bad for Facebook? It's only bad for investors, if they invested in Facebook before its market value dropped, right? Also, I'm sure the investors and underwriters knew that there's a significant amount of uncertainty and risk when investing in new technology companies, especially with industries that have never been around before. I feel like this is just the media circus trying to blow things out of proportion.

JoshTriplett 14y ago
Edit: Thanks to the responses that pointed out that the 500 private investor limit did not force the IPO, just a pile of disclosure requirements and other restrictions; apparently some of the news sources I'd originally read had not quite grasped that point either. The main point still stands, though: Facebook had a larger-than-normal set of private investors and brokers that did quite a bit of trading at IPO-time. Facebook had a relatively large number of private investors, enough to trigger additional restrictions regarding reporting and disclosure. Facebook hadn't intended to exceed that limit, but hit it anyway due in large part to new restrictions that prevented intermediaries such as brokers from letting many downstream customers count as 1, as well as people reselling their shares on secondary markets to extract value from them. Those same private investors and brokers did quite a bit of trading when the IPO happened, much of it not to the benefit of Facebook.
- veyron 14y ago
  Facebook was not required to go public. I've posted this many times, including http://news.ycombinator.com/item?id=3753915 http://news.ycombinator.com/item?id=3753915 They were required to make disclosures but no one forced them to go public. Plenty of companies have more than 500 shareholders yet still opt to remain private. > Companies with more than $10 million in assets whose securities are held by more than 500 owners must file annual and other periodic reports. These reports are available to the public through the SEC's EDGAR database.
  - pg 14y ago
    Please stop shouting.
    - veyron 14y ago
      Please accept my apology for shouting. Many threads regarding the Facebook IPO are littered with people repeating the same idea that Facebook was forced to go public, based on a faulty understanding of SEC regulations. And no one, especially late stage YC companies, should feel pressured to IPO.
  - JoshTriplett 14y ago
    Thanks for the correction. Various news sources have made the same mistake, and I must have picked it up from one of those.
  - cynicalkane 14y ago
    A company forced to file these reports essentially has all the costs of being a public company. There's absolutely no reason not to go public at this point, to benefit existing shareholders. The average op-ed writer is ignorant about finance but this is what is meant when informed people talk about companies being forced to go public--they're forced to take on all the costs of being public, so might as well just IPO.
    - veyron 14y ago
      They are forced to take some of the economic costs of being public, but the managers have much more flexibility when the company is private. For example, Facebook's acquisition of Instagram would not fly if FB were public when that happened. You can argue that the paperwork is onerous, but its paperwork. The headaches involved with public companies go far beyond a few paltry reports.
      - pcl 14y ago
        > ... the managers have much more flexibility when the company is private. For example, Facebook's acquisition of Instagram would not fly if FB were public when that happened. Is that really the case? In other words, what additional restrictions does a publicly-listed company have that privately-traded companies do not have? Your comment seems plausible, but I could imagine that the SEC regulations around > 500 shareholders etc. could also include all the shareholder protections we associate with public companies, as well. Additionally, I wouldn't be surprised if Mark Zuckerberg's controlling interest in FB had some sort of an impact on what regulations apply to the company.
pkteison 14y ago
It is referred to as botched because it actually was - NASDAQ actually broke during the initial day of trading. Initial start of trading was delayed, then trades went through didn't get confirmed for -hours-, which is something of a disaster. This isn't some figurative use of the term, nasdaq actually failed in the objective sense. NASDAQ's chief basically saying his company sucked: http://www.bloomberg.com/news/2012-05-20/nasdaq-ceo-says-poor-design-in-ipo-software-delayed-facebook.html http://www.bloomberg.com/news/2012-05-20/nasdaq-ceo-says-poo...
- powertower 14y ago
  You're forgetting the part where NASDAQ told every major player to sell the Facebook shares they had, if they wanted to get in on some of that 40 million in compensations (you had to fill in the sold-at price on the form, or forget about it).
  - cynicalkane 14y ago
    Can you clarify or provide a source? It's not clear what you're saying, or why it's bad. If you're saying that traders need to have sold shares to get compensation, well, should NASDAQ just compensate everyone who says they didn't sell shares but were planning to, cross their heart and hope to die?
    - veyron 14y ago
      If you are arguing that you were damaged specifically because of technical glitches associated with the IPO, you are expected to sell the shares. Any price action after that is due to factors outside of NASDAQ's direct control, and there's a sense in which you are taking risk by continuing to hold. (Otherwise, everyone would sue whenever a stock price moved -- shareholders complaining when prices fall and short parties complaining when prices rise)
    - anonymoushn 14y ago
      http://www.businessinsider.com/exclusive-qa-a-hedge-fund-manager-who-bet-100-million-on-the-facebook-ipo-just-called-and-boy-is-he-furious-2012-5 http://www.businessinsider.com/exclusive-qa-a-hedge-fund-man... Many solutions available are better than the one that NASDAQ implemented. For example, they could halt trading when they realize their matching engine doesn't work.

JoshTriplett 14y ago

Edit: Thanks to the responses that pointed out that the 500 private investor limit did not force the IPO, just a pile of disclosure requirements and other restrictions; apparently some of the news sources I'd originally read had not quite grasped that point either. The main point still stands, though: Facebook had a larger-than-normal set of private investors and brokers that did quite a bit of trading at IPO-time. Facebook had a relatively large number of private investors, enough to trigger additional restrictions regarding reporting and disclosure. Facebook hadn't intended to exceed that limit, but hit it anyway due in large part to new restrictions that prevented intermediaries such as brokers from letting many downstream customers count as 1, as well as people reselling their shares on secondary markets to extract value from them. Those same private investors and brokers did quite a bit of trading when the IPO happened, much of it not to the benefit of Facebook.

veyron 14y ago
Facebook was not required to go public. I've posted this many times, including http://news.ycombinator.com/item?id=3753915 http://news.ycombinator.com/item?id=3753915 They were required to make disclosures but no one forced them to go public. Plenty of companies have more than 500 shareholders yet still opt to remain private. > Companies with more than $10 million in assets whose securities are held by more than 500 owners must file annual and other periodic reports. These reports are available to the public through the SEC's EDGAR database.
- pg 14y ago
  Please stop shouting.
  - veyron 14y ago
    Please accept my apology for shouting. Many threads regarding the Facebook IPO are littered with people repeating the same idea that Facebook was forced to go public, based on a faulty understanding of SEC regulations. And no one, especially late stage YC companies, should feel pressured to IPO.
- JoshTriplett 14y ago
  Thanks for the correction. Various news sources have made the same mistake, and I must have picked it up from one of those.
- cynicalkane 14y ago
  A company forced to file these reports essentially has all the costs of being a public company. There's absolutely no reason not to go public at this point, to benefit existing shareholders. The average op-ed writer is ignorant about finance but this is what is meant when informed people talk about companies being forced to go public--they're forced to take on all the costs of being public, so might as well just IPO.
  - veyron 14y ago
    They are forced to take some of the economic costs of being public, but the managers have much more flexibility when the company is private. For example, Facebook's acquisition of Instagram would not fly if FB were public when that happened. You can argue that the paperwork is onerous, but its paperwork. The headaches involved with public companies go far beyond a few paltry reports.
    - pcl 14y ago
      > ... the managers have much more flexibility when the company is private. For example, Facebook's acquisition of Instagram would not fly if FB were public when that happened. Is that really the case? In other words, what additional restrictions does a publicly-listed company have that privately-traded companies do not have? Your comment seems plausible, but I could imagine that the SEC regulations around > 500 shareholders etc. could also include all the shareholder protections we associate with public companies, as well. Additionally, I wouldn't be surprised if Mark Zuckerberg's controlling interest in FB had some sort of an impact on what regulations apply to the company.

pkteison 14y ago

It is referred to as botched because it actually was - NASDAQ actually broke during the initial day of trading. Initial start of trading was delayed, then trades went through didn't get confirmed for -hours-, which is something of a disaster. This isn't some figurative use of the term, nasdaq actually failed in the objective sense. NASDAQ's chief basically saying his company sucked: http://www.bloomberg.com/news/2012-05-20/nasdaq-ceo-says-poor-design-in-ipo-software-delayed-facebook.html http://www.bloomberg.com/news/2012-05-20/nasdaq-ceo-says-poo...

powertower 14y ago
You're forgetting the part where NASDAQ told every major player to sell the Facebook shares they had, if they wanted to get in on some of that 40 million in compensations (you had to fill in the sold-at price on the form, or forget about it).
- cynicalkane 14y ago
  Can you clarify or provide a source? It's not clear what you're saying, or why it's bad. If you're saying that traders need to have sold shares to get compensation, well, should NASDAQ just compensate everyone who says they didn't sell shares but were planning to, cross their heart and hope to die?
  - veyron 14y ago
    If you are arguing that you were damaged specifically because of technical glitches associated with the IPO, you are expected to sell the shares. Any price action after that is due to factors outside of NASDAQ's direct control, and there's a sense in which you are taking risk by continuing to hold. (Otherwise, everyone would sue whenever a stock price moved -- shareholders complaining when prices fall and short parties complaining when prices rise)
  - anonymoushn 14y ago
    http://www.businessinsider.com/exclusive-qa-a-hedge-fund-manager-who-bet-100-million-on-the-facebook-ipo-just-called-and-boy-is-he-furious-2012-5 http://www.businessinsider.com/exclusive-qa-a-hedge-fund-man... Many solutions available are better than the one that NASDAQ implemented. For example, they could halt trading when they realize their matching engine doesn't work.