Let’s forget about the scam underwriters such as Morgan Stanley (NYSE:MS) perpetrated on the public by manipulating Facebook’s (NASDAQ:FB) IPO price and share count in the final 48 hours. Instead, let’s take a look at the deal from 10,000 feet: after 2 bubbles and crashes in a decade of stock market activity, Mark Zuckerberg et al acted perfectly rational in sucking dry the equity value pre-IPO. Don’t believe me? Just ask Ivan Pavlov.
Yes, Mark Zuckerberg’s decisions regarding the Facebook IPO were as predictable as Pavlov’s dog coming for dinner at the sound of the bell. Our culture of greed has conditioned a new generation of entrepreneurs to meticulously pull as much wealth as humanly possible from their companies before throwing the stock certificates to the sleazebag thieves on Wall Street. Reid Hoffman, Andrew Mason, and Mark Pincus did the same at LinkedIn (NYSE:LNKD), Groupon (NASDAQ:GRPN), and Zynga (NASDAQ:ZNGA).
At first blush this behavior sounds hardcore, but is it? Is it unethical to spend every waking hour and ounce of energy building a company (which in this case 900 million people use for free) only to try to capture the full value of equity? Do value creators such as Zuckerberg owe public investors a piece of the upside? Can any of us truly look in the mirror and say we would’ve called our underwriters and said, “Hey, wait a minute. I am making too much money here. Can you please bring the price of the IPO down so the general public can get rich too?”
Right. I don’t think so.
So, before we go bashing Zuckerberg as a greedy bastard, keep a few things in mind:
1) He is merely a product of the culture we find ourselves in circa 2012.
2) Younger people like Zuckerberg have seen nothing but cycles of Wall Street ripping off entrepreneurs and the general public in what amounts to a rigged casino.
3) Zuckerberg had the steel nerves to leave a huge portion of his risk on the table much longer than almost every other entrepreneur who hit world shaking milestones.
And now for the most important lesson from the Facebook IPO:
When a stock is over-valued, don’t buy it. Plain and simple. It’s a free country … and stupidity is a personal freedom.
As the proverb goes: don’t hate the player, hate the game. And if we’re genuinely sick of the bullsh*t game, then we need to stop playing instead of letting greed get the best of us. Or has Wall Street turned us into Pavlov’s dog too?
