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Facebook IPO Fuss and Fizzle

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May 28, 2012

Several media outlets covered the recent Facebook IPO, which raised a whopping USD 16 billion, as well as the questions that emerged in its aftermath.

 

Putting aside the fact that Facebook CEO Mark Zuckerberg wore a hoodie at a recent road show stop in suit-and-tie New York, the Deal Pipeline pointed out some issues with the company prior to the IPO, such as the USD 1 billion agreement to buy mobile photo sharing software startup Instagram, a startup that apparently does not generate revenue or exhibit an established business model.

 

Subsequent to the IPO, other issues with emerged, one a regulatory issue about disclosure during pre-IPO period and the actions of bankers related to the deal, as reported by Business Insider, and a technical problem experienced by the stock exchange NASDAQ on the day of the IPO, as reported by the WSJ.

 

The share price of Facebook fell significantly after the IPO, rather than popping upwards, which serves to undermine confidence in the stock. At that point, Deal Pipeline chimed in again saying that the falling stock price of Facebook could “chill” the IPO trend for high growth companies, some of which are PE backed.

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