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Help me understand why Facebook taking every dollar out of the market was a bad thing for them. I understand why Wall Street wasn't happy about it (since they e

Help me understand why Facebook taking every dollar out of the market was a bad thing for them. I understand why Wall Street wasn't happy about it (since they expected a pop they could profit from & had to buy stock to fulfill their obligations... and why should taking a company public be an entirely risk-free profit opportunity anyway?) But, why was it bad for Facebook? Sure, their stock was below the IPO value for almost a year, but employees almost certainly had their options priced well below the IPO price, right? What other ways can a slightly lowered stock price hurt a company in the year after an IPO? Genuinely curious about this.

jchrisa 13y ago
I saw a few intelligent commentaries about this who agreed it was a great IPO for Facebook. The way I think about it, they floated it like a wet sponge, something you can only do if you are confident and taking the long view.
encoderer 13y ago
Not "certainly." We had an IPO where I work in 2012. People hired very recently before the IPO had a strike price near the offering price. Moreover, there is a mental dynamic when recruiting. A steadily appreciating stock is a helluva recruiting tool.
prostoalex 13y ago
You're correct in your understanding - the company maximized the price and ended up with a nice chunk of cash in its bank account. Internally someone starting the week of IPO might have received his stock grant at that week's price might not feel particularly upbeat when the stock price is later cut in half. There's always some churn and renegotiation going on at the companies whose stock price suffers significantly, and that makes it harder to concentrate on execution.
mathattack 13y ago
The backlash will come the next time Facebook tries to raise money. That said, the cost is much less than the amount of money that Twitter left on the table. Also - if every company flopped post-IPO, the IPO market would die. That's not Facebook's immediate problem, and again "doing the right thing" isn't worth leaving $20/share in the hands of flippers.

jchrisa 13y ago

I saw a few intelligent commentaries about this who agreed it was a great IPO for Facebook. The way I think about it, they floated it like a wet sponge, something you can only do if you are confident and taking the long view.

encoderer 13y ago

Not "certainly." We had an IPO where I work in 2012. People hired very recently before the IPO had a strike price near the offering price. Moreover, there is a mental dynamic when recruiting. A steadily appreciating stock is a helluva recruiting tool.

prostoalex 13y ago

You're correct in your understanding - the company maximized the price and ended up with a nice chunk of cash in its bank account. Internally someone starting the week of IPO might have received his stock grant at that week's price might not feel particularly upbeat when the stock price is later cut in half. There's always some churn and renegotiation going on at the companies whose stock price suffers significantly, and that makes it harder to concentrate on execution.

mathattack 13y ago

The backlash will come the next time Facebook tries to raise money. That said, the cost is much less than the amount of money that Twitter left on the table. Also - if every company flopped post-IPO, the IPO market would die. That's not Facebook's immediate problem, and again "doing the right thing" isn't worth leaving $20/share in the hands of flippers.