5 ms·

Full disclosure: I currently own FB shares (at a loss), but could sell at any time. Cuban is right in that the Facebook IPO was great in that they sold their s

Full disclosure: I currently own FB shares (at a loss), but could sell at any time. Cuban is right in that the Facebook IPO was great in that they sold their shares for higher than what they were worth and maximized the benefit for FB. But the more important fact is that investors, who are the lifeblood of this entire market, got fleeced, and that's long-term bad. The people that you do business with MUST have confidence that you will live up to your end of any deal that you make with them. If you're only going to do a single one-shot deal with someone, I suppose it's doable to screw them for whatever they're worth. That seems to be the Wall-Street-style business model that is popular with some people these days. But if you intend to do business over and over again, screwing everyone you deal with is a great way to go broke very quickly. As well, if you attain the reputation of being someone that is bad to do business with, then you will suffer as well. Do you think Andrew Mason is going to get as good of a ride on the next company once Groupon fails? How difficult will it be for Facebook to have another secondary if it needs to raise more capital? My guess is that any new deals underwritten by Morgan Stanley will get a second look-over from any potential investors, given the fact that they really sold some snake oil with FB at $100B.

joelrunyon 14y ago
I'm going to be very surprised if FB is going to need to raise another 10B. Also, it's interesting that when facebook pulled one over on the bankers, "they got screwed", but when the bankers do it to everyone else, it's "business as usual." Of course Facebook isn't going to get valued as highly the next time through - THEY KNOW THAT - and that's why they got as much out of their IPO as they could.
- steve8918 14y ago
  It will affect FB when they make acquisitions based on shares as well. It might make potential acquirees more reluctant to take anything but cash, which will be a drag on their financials. FB didn't pull one over on the bankers. The bankers and FB sold their shares to investors, so both parties are "guilty" to some extent. Investors are guilty for believing the hype as well, but in any deal, the buyers have a lot more power than the sellers, so keeping the investors happy is important for a healthy market.
jpiasetz 14y ago
How did investors get "fleeced"? Nobody lied to them, they had all the info and just made the wrong choice. If next time investors decide to sit out Andrew Mason next business just because they did poorly on the last one. I for one will be around to pick up the easy money. Also you're only talk the subset of investor that bought Facebook. There will be an equal number picking it up for cheap. The deal FB made was they tell everyone about the business, everyone else prices it. It's not Facebook's fault investor screwed up their end of the bargain.
- spinchange 14y ago
  >The deal FB made was they tell everyone about the business, everyone else prices it The underwriters priced it - at what CFO told them he wanted. That's not usually how these things work (imagine a bank ignoring a property appraisal in favor of what you tell them the property is worth), but the banks are shells of their former selves and needed this IPO and all the promise it held pretty desperately. They protected themselves with the greenshoe/naked short, and retail investors got left holding the bag. Maybe it's not "fleecing" per say, but it's not the kind of financial engineering an enterprise thinking about delivering long term returns to its investors would do.
  - Evbn 14y ago
    Long term investors who bought at at the IPO don't even know what FB's price is now, because they aren't looking at short term returns.
    - spinchange 14y ago
      My point was that the deal was structured in a way that practically ensured the share price would fall. To think otherwise, for facebook management or investors is to believe in hubris. I think it's telling and kind of odd that in Cuban's own defense of the deal, he's a sucker for having bought at the IPO price. As an aside, high beta (volatility) stocks generally don't perform as well, long term, as do consistent growers with stable price action.
rayiner 14y ago
> But the more important fact is that investors, who are the lifeblood of this entire market, got fleeced, and that's long-term bad. I'm pretty sure engineers are the lifeblood of this market. But then again, I'm old-school.
Evbn 14y ago
Andrew Mason BSed his way to a multimillion dollar payday, FU money for life. Why should he care about next time? Because his goal in life feel is to be Elon Musk?
icelancer 14y ago
>But the more important fact is that investors, who are the lifeblood of this entire market, got fleeced, and that's long-term bad. Bullshit. FB/Zuckerberg didn't lie in the prospectus. It was all laid out there and the writing was on the wall. I also own shares (at a slight loss / breakeven). It wasn't fleecing in the least. Same with GroupOn. Anyone who feels "fleeced" there is an idiot. Any "damage" done to the tech sector by Facebook's IPO is probably a net positive for Facebook if it increases barriers to entry. So, they win there, too.

joelrunyon 14y ago

I'm going to be very surprised if FB is going to need to raise another 10B. Also, it's interesting that when facebook pulled one over on the bankers, "they got screwed", but when the bankers do it to everyone else, it's "business as usual." Of course Facebook isn't going to get valued as highly the next time through - THEY KNOW THAT - and that's why they got as much out of their IPO as they could.

steve8918 14y ago
It will affect FB when they make acquisitions based on shares as well. It might make potential acquirees more reluctant to take anything but cash, which will be a drag on their financials. FB didn't pull one over on the bankers. The bankers and FB sold their shares to investors, so both parties are "guilty" to some extent. Investors are guilty for believing the hype as well, but in any deal, the buyers have a lot more power than the sellers, so keeping the investors happy is important for a healthy market.

jpiasetz 14y ago

How did investors get "fleeced"? Nobody lied to them, they had all the info and just made the wrong choice. If next time investors decide to sit out Andrew Mason next business just because they did poorly on the last one. I for one will be around to pick up the easy money. Also you're only talk the subset of investor that bought Facebook. There will be an equal number picking it up for cheap. The deal FB made was they tell everyone about the business, everyone else prices it. It's not Facebook's fault investor screwed up their end of the bargain.

spinchange 14y ago
>The deal FB made was they tell everyone about the business, everyone else prices it The underwriters priced it - at what CFO told them he wanted. That's not usually how these things work (imagine a bank ignoring a property appraisal in favor of what you tell them the property is worth), but the banks are shells of their former selves and needed this IPO and all the promise it held pretty desperately. They protected themselves with the greenshoe/naked short, and retail investors got left holding the bag. Maybe it's not "fleecing" per say, but it's not the kind of financial engineering an enterprise thinking about delivering long term returns to its investors would do.
- Evbn 14y ago
  Long term investors who bought at at the IPO don't even know what FB's price is now, because they aren't looking at short term returns.
  - spinchange 14y ago
    My point was that the deal was structured in a way that practically ensured the share price would fall. To think otherwise, for facebook management or investors is to believe in hubris. I think it's telling and kind of odd that in Cuban's own defense of the deal, he's a sucker for having bought at the IPO price. As an aside, high beta (volatility) stocks generally don't perform as well, long term, as do consistent growers with stable price action.

rayiner 14y ago

> But the more important fact is that investors, who are the lifeblood of this entire market, got fleeced, and that's long-term bad. I'm pretty sure engineers are the lifeblood of this market. But then again, I'm old-school.

Evbn 14y ago

Andrew Mason BSed his way to a multimillion dollar payday, FU money for life. Why should he care about next time? Because his goal in life feel is to be Elon Musk?

icelancer 14y ago

>But the more important fact is that investors, who are the lifeblood of this entire market, got fleeced, and that's long-term bad. Bullshit. FB/Zuckerberg didn't lie in the prospectus. It was all laid out there and the writing was on the wall. I also own shares (at a slight loss / breakeven). It wasn't fleecing in the least. Same with GroupOn. Anyone who feels "fleeced" there is an idiot. Any "damage" done to the tech sector by Facebook's IPO is probably a net positive for Facebook if it increases barriers to entry. So, they win there, too.