Some Wall Street analysts are upset that Mark Zuckerberg did not demonstrate fealty to them during his IPO roadshow this week by wearing a suit and tie.
Michael Pachter, an analyst for Wedbush Securities (who?), bellowed, "I think that's a mark of immaturity. I think that he has to realize he's bringing investors in as a new constituency right now, and I think he's got to show them the respect that they deserve because he's asking them for their money."
I'm calling genuine frontier bullshit on that pronouncement.
Mark Zuckerberg, through the force of his own mind, created a business that will be valued at over $90 billion. He wears a hoodie. Steve Jobs created a company worth half a trillion dollars at today's price. He wore a turtleneck. They created value. Wall Streeters, who wear suits and ties, produce nothing of note, exact unnecessary fees on all your retirement savings, and nearly destroyed the U.S. financial system.
Investors are clamoring to get in on the Facebook IPO, and Zuckerberg doesn't really need Wall Street to do it. "Wall Street" is simply a distribution system for financial products such as stocks, bonds and derivatives. They distribute their "products" through brokers and other sales people, much as WalMart takes Depends from Kimberly-Clark and distributes them through 4,000 stores. The analogy is intentional.
Facebook has its own "distribution" system of nearly a billion users, who love the product. Do you think maybe, just maybe, each of them might pony up $100 for one share of Facebook? Or that a tenth of those nearly billion users might invest $1000 in the hottest IPO in history? Probably. There's your $100 billion right there, Mark. Ask the beneficiaries of Kickstarter; crowdfunding is the next big thing.
As proof that Facebook doesn't really need Wall Street is the fact that the investment banks radically cut their underwriting fees to get the business. Facebook wasn't soliciting Wall Street's business, it was the other way around.
Facebook is not asking investors for their money. Investors are begging to give it to them. Wall Street is the avenue Facebook has chosen to distribute those shares. But they don't really need Wall Street, and that's why every analyst and banker who met Zuckerberg should have thrown off their Brooks Brothers and worn jeans and a hoodie. As a show of respect.
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Facebook IPO: Is Zuckerberg's Hoodie a Sign of Immaturity?
"...(Facebook) seeks a valuation at 24 times revenue, compared with 5 times for Google Inc., according to data compiled by Bloomberg."
The problem is, if it IPOs anywhere close to a 24x multiple, then it is pre-destined to burst - And, FB is so integral now to many other companies businesses, well, yes, that is the bubble everyone fears, when FB takes the entire ecosystem down with it.
The valuation at 24x is based on some absurd notion of near infinite growth, within a finite system.
There are only so many eyeballs and so many minutes of the day. The truth is that social network time is aroun 12 minutes per day, on average, in the U.S., therefore ad-exposure time is quite tiny.
I'm not even sure I'd give them a 5x valuation. They haven't earned that level of legitimacy yet.
Mark Zuckerberg, through the force of his own mind? I don't think so.
Nearly a billion users, who love the product? And another billion that hate it, how many user complain about the security changes, the visual changes, and now if you want your posts to reach everyone you'll need to pay for that distribution (Highlight Tool), a round about way of charging to use the site as he promised you wouldn't.
No thank you.
The entire persona of Zuckerberg ... "hoodie" and all ... is of course carefully engineered for the press, but is there anything sensible behind a (what is it now?) "$90 billion valuation?"
(Is there, for that matter, really any substance to calling Apple, Inc. worth a "trillion?" That's a mighty big number...)
A crowd-psychology play, in both cases. A gigantic number is a great big draw, and everyone in Wall Street knows it well. The "IPO" is one of their fundamental products, and they know how to sell it to suckers large and small.
"Know what you own, and know why you own it." The price of anything can be manipulated, more or less at will, and it certainly will be. If you walk into a gambling hall, you must know one thing clearly: you are GOING to get fleeced.
I also don't want to know about comparisons to Steve Jobs and his turtlenecks. Jobs didn't start the turtlenecks until his 2nd round at Apple. As a matter of fact, Jobs didn't dress down during the IPO, he did wear suit and tie/bow. Here's a picture of Jobs celebrating Apple's IPO (no turtleneck or dress down):
http://www.mac-history.net/steve-jobs/2012-01-30/the-legend-of-steve-jobs-his-life-and-career/attachment/steve_jobs_apple_ipo_1980