Media sources reported on Friday that Facebook's founder, Mark Zuckerberg, had held staff meetings, including a company-wide gathering earlier this month, to counter sagging morale caused by the sharp drop in the company's stock.
In the process -- and I suspect inadvertently -- Mr. Zuckerberg reminded us of the important role that public markets play in today's complex global economy. And we should all be grateful to him given the extent to which some politicians have taken to generalized market bashing.
By going public in a highly-watched IPO last May, Facebook illustrated two important functions of public markets: First, they allow companies to raise capital that is both "permanent" and non-debt creating, thus mobilizing the best funding for productive expansion; and second, they provide a monetization mechanism for founding management and staff, thereby incentivizing and rewarding successful entrepreneurship and risk-taking.
But public markets do much more than that. They also act as an important reality check, supplying management and staff with information that may be critical for sustaining innovation and success.
Prior to going public, there seemed to be no limit to Facebook's mystique and charisma; and no end to its ability to meet needs that many did not even realize they had.
Facebook was the kind of disruptor that does not come around very often.
It singlehandedly pushed out the frontiers of social media, creating and sustaining a phenomenon that many people, in virtually every country around the world, wished to be part of.
Facebook was the hip employer, promising its staff innovation, status, wealth and a sense of mission. And, if all this was not enough, it was also redefining how businesses, governments and individuals interact.
For many, Facebook could do no wrong.
With this amazing aura, Facebook management and staff would have been easily forgiven for growing over-confident eventually and ultimately complacent. Indeed, given the company's rather restricted information-dissemination policy, few on the outside could have credibly challenged its achievements and ambitions.
The IPO changed all this. Suddenly, hundreds of analysts and observers were dissecting every bit of company information. Virtually every comment made by Mr. Zuckerberg and his talented colleagues was scrutinized for content and signals. And numerous attempts were made to link his plans and vision to a potential net revenue stream and a range for the company's shares.
Facebook's mystique and the related sense that it could do no wrong were replaced by the brutal reality of analyst's calls and downgrades. The stock quickly traded down from its hyped IPO level which, as I noted on the second day of trading, had sucked in too many unsuspecting investors.
In all this, the company's standing and its credibility have taken a material hit that, only a few months ago, would have been deemed not just unlikely but unthinkable. No wonder some suspect that morale at Facebook is low; and no wonder Mr. Zuckerberg felt it necessary, according to media reports, to address his company's stock decline which, according to a Wall Street Journal article, he deemed "painful" for some employees.
Ironically, all this may actually be good for Facebook in the long run.
Every successful company requires periodic reality checks which, in many cases, lead to beneficial course corrections. Indeed, the most successful companies do their utmost to hardwire as many reliable checks and balances as possible.
Yesterday's Facebook mystique has given way to a very public stock market debacle. Yet if the signals involved are well internalized by management and staff, Facebook could well avoid what could have been an even bigger reality shock down the road.
In the process, the company will help send a message to all those politicians who are way too eager to broad-brush public markets as a whole with the spectacular failures of a few segments. Well-functioning markets have played, and will continue to play, a critical role in maintaining the entrepreneurship and discipline that are essential to America's traditional vibrancy, its power of invention and innovation, and its global competitiveness.
Cross-posted from CNBC.com
Anyone who looked at the prospectus saw all the red flags. Employees who have options that are in the money for a $20 stock or less will still see a gain after the lockup period. My advice is to take what you get on the day you exercise and forget what you might have had at $40. That was never real for employees.
I personally lock down my FB account to only 3 people, my children. They can tell me via FB that there is a post for me to see. 99% of the time it is a new photo of one or two of our grandchildren. That's all it is good for to me. Requests from Friends are denied and from business people told to use LinkedIn. I think the market is working just fine for FB.
Facebook should focus on their vision to the company and where they want to be - as detailed in Mickey Mouse Ears or Rare Beers? - http://rsilberman.com/?p=418 - and on executing it. Leave the stock to the stock market.
They have slapped the public in the face far to often. People grow weary of their intrusion.
Multiple personalities is just the latest symptom.
this is actually what you said, and please note the word could inserted for the wriggle room effect
"And this Facebook episode could also serve as a timely reminder for investors to consider not only what they invest in, but also how they invest— especially in hyped names.
or this: "suggest that we may need to wait for another, more legitimate catalyst. "
Notice in both instances, in the first if it could, then it also could not and in the second way may need to wait, or we may not. The man made no actual call, and no matter what direction the stock went he could in fact say he was right. The worst economic pundit in the world, he does this with each and every writing. never maes the call, but gives himself enough use of room to claim he was right
I can do this too, "we may land a man on the moon on Monday"
It's a shell game. It's not about how good or bad a company is, whether it produces anything or not...
it's not even about the PERCEPTION of that, at least it hasn't been for quite some time...
The stock market has nothing to do with investing. It has everything to do with roulette.
It isn't.
The IT Department at your job is NOT responsible for bringing in revenue. The IT Department at your job is an EXPENSE.
Physics and Engineering will always be superior to the virtual world. There are only so many things that you can accomplish on a computer screen. There is only so much interconnectivity that you can impose on the physical world before it becomes either a security threat - or just plain unnecessary.
It would have only been a matter of time before Google went the same way as Facebook - that's why Google bought Motorola Mobility.
Even Facebook had to give way to the laws of Physics. A supermassive star will implode under its own gravity once it starts to run out of fuel. Then like a Black Hole (Google), it will start to draw in everything in its path in order to stay viable.
I do indeed know what I'm talking about, sir...
: )
This stock suffers from the SIRI effect. SIrius has massive following but stock price is like two bucks.
Investing is about creating value and an income stream that should be reliable. Speculating is based on the assumption that you can purchase something today that you can sell at a higher price tomorrow when the item you are selling has little-to-no intrinsic value.
Unfortunately, the speculators now control "The Market" and by default the market operates more like a casino than a place to build long term wealth. However, this is not the real problem we face today.
The real problem we face today is that the recent collapse of a whole host of "financial products" has destroyed the one commodity that is essential to any functioning economic system -- TRUST. The market is now perceived to be nothing more than deceit and lies being marketed to the unwitting client. As long as that lack of trust dominates the market it cannot grow.
Finance is a part of the economic system, not the entire system.
no one clicks those FB ads. no one.
Really? Generalized market bashing? I would be very interested to know what American politicians have taken to "generalized market bashing." I have yet to hear a politician talk about doing away with capitalism or stating that the American market is dead and gone and never coming back and we should just be satisfied with regressing to third world status. Even though a fairly good case can be made for both statements.
Realized that it was a dead end and that the next great idea was more likely to be developed by some bright kid sitting in their dorm room than by their research team. The trouble with businesses like Facebook is that there are no barriers to entry. Anybody can start the next Facebook, all you need is a good idea and a bit of energy.
People do not log on to Facebook to be served ads, they are looking to exploit the social networking features of the online environment.
As an author, many have implored me to create an account devoted to my speculative universe. There is no purchase for it there. Regardless of the visual traction I may engender, under every analysis of the networking potential, Facebook is a fairly useless venue upon to build a mass marketing campaign.
Miles "Dollars & Sense {grin}" Long
Seeing it admitted so openly should be troubling to all.
The "non debt creating" now means that CEO salaries can be unjustifiably exhorbitant... corporations owe no debt to shareholders whose returns suffer. Fraud has been integrated into corporate business plans... because shareholders can be stuck with the fines and penalties. Short term profits come first... because long term viability is no longer a debt owed to shareholders. Bankruptcies are cheered by the Romney types... because shareholders getting wiped out barely impacts the profits for the few, while voiding contracts with labor, destroying unions and creating new buying opportunities for the rich few.
There are of course exceptions to this new reality, but vulture capitalism has become all too prevalent.
If you mean directly then you are wrong. The very nature of a corporation absolves the shareholders from any responsibility for the actions of the corporation. If you mean indirectly then yes, but that's always been the case with anything that reduces share price and/or available cash for dividends and for raising the value of a company.
2. The Facebook valuation was incredibly overpriced, it is the job of the street firms rolling out the IPO to vet the offering on behalf of their investors. They once again failed to do that in favor of massive profit taking. Hence the need for regulation.
3. The market, as represented, has been consistently dergulated since the Reagan Revolution. What has that yielded, 3 massive financial sector driven economic collapses in a 23 year time span. Collapses that has wiped out huge swathes of middle income wealth and retirment stability. Hence the need to stop this ever crippling deregulation zeal.
If we want most Aemricans to be prosperous and financially stable, I agree a market system is the right choice, but one with proper regulation and a social safety net in place to backstop the inevitable failures of the system and the vagueries of the business cycle. What we have witnessed in those 3 collapses has not been the vagueries of the business cycle though, it has been intentional bad faith actions, like the facebook IPO, that have lead to financial ruin. The non-wall street american citizen has been basically left to hold the bag on each occassion while wall street becomes less regulated.