Expand Your Mind: Facebook’s IPO
by Miki Saxon
Facebook’s IPO is all over the news and who am I to ignore a topic of obvious interest? Suffice it to say that IMHO valuing Facebook above McDonald’s, Citigroup and Amazon is totally ridiculous—but what do I know?
However, I’m not alone.
A survey done by WhisperNumber.com polled 1,100 registered traders and investors, found that 71% do not consider Facebook a long-term investment and will not be buying share after Facebook’s initial public offering.
And comparing Facebook to Google isn’t a no brainer; it’s a no brains-er.
But when Facebook amended its S-1 on Monday…the company reported a season decline in revenues hitting $1.058 billion compared to $1.131 billion in the quarter before — the questions started cropping up about whether it was too much to ask that Facebook soar in the markets like Google had. Just prior to Google’s IPO, on the other hand was gearing up quarter after quarter pre-IPO and experienced sequential revenue growth of 27.2% from Q4 to Q1 before its IPO.
Bottom line is that for garden-variety investors (that us) making a profit from Facebook isn’t likely (unless, IMHO again, the market crashes and you still have spare change to invest. And even if you there would probably be better places to use it.)
But if history offers any lesson, average investors face steep odds if they hope to make big money in a much-hyped stock like Facebook.
The IPO should create at least 1000 new millionaires, but it’s unlikely that wealth will be ostentatiously displayed; the exception being when funding another startup—or buying a bicycle.
The hand-painted Italian bicycles that flash across Silicon Valley on Saturday mornings have become the new Ferrari — and only the cognoscenti could imagine that they cost more than $20,000.
My favorite bit of IPO wisdom addressed to all those newbie Facebook millionaires comes from Seattle-based entrepreneur and investor Jonathan Sposato, who earned his first taste of wealth at Microsoft 20 years ago, then founded Picnik, which was bought be Google, and is currently GeekWire’s chairman.
For some, stock wealth launched entrepreneurship and philanthropy. For others, materialism and conspicuous consumption. It was a lottery ticket, plain and simple. And statistically, 90% of all lottery ticket winners go broke after 3 years. And while people seldom talk about money in our culture, avoiding the topic makes history repeat itself, and stigmatizes issues around money.
Thus, I offer some very candid advice for my younger colleagues at Facebook, who are about to have a life-changing event.
Finally, here is some useful advice in the form of what to consider when offered equity in lieu of cash.
The shares-versus-dollars decision presents a common dilemma for startup staffers and consultants. Early-stage companies often don’t have the ready money to just write a cheque, so they have to lure talent with the promise of stock. (…) If you are in the fortunate position of weighing a juicy stock offer, what issues should colour your decision?
Flickr image credit: pedroelcarvalho
