Episode 25: The Facebook IPO

Hey Acquired listeners. A note about this show: we recorded this
episode the night before the 2016 Election Day in the US. At the
time, the biggest change we saw coming was adding a new type of
content to Acquired in analyzing IPO’s, which we introduce in
this episode. Two days later, we woke up to a very different
world than the one we were expecting. Reflecting on what’s
happened, and the past few months of our show, we wanted to say
two things:



First, we want to apologize for our cavalier attitude toward this
election cycle, and our glossing over the clearly very real
problems and deep divide in America that it represented. In the
Skype episode, David pretty glibly compared the AT&T - Time
Warner merger to "Make America Great Again", arguing that any
reactionary force is “on the wrong side of history” and cannot be
relevant in a changing world. That was wrong, the sentiment
behind it was wrong, and it was insensitive to the very real pain
a lot of people are feeling out there on both sides.


Second, looking back on this particular episode about the
Facebook IPO, we think it actually might present a relevant
parable for our country right now and--we hope--some important
lessons for the technology industry going forward. For all the
wonderful aspects of the tech industry that we celebrate on this
show, there is no doubt that it also bears a great deal of
responsibility for the current divide in America, and especially
in its contribution to wealth inequality. Likewise, for all the
wonderful aspects to the Facebook IPO story, as told in this
episode, there is a very dark side as well: Facebook
shareholders, investment banks and institutional investors raked
in billions of dollars at the expense of individual retail
investors who lost their shirts.



At the same time, Facebook’s perseverance through their “broken
IPO", and their determination in overcoming with incredible speed
the massive, existential challenge to their business model posed
by mobile, is something we think *can be* an inspiration to us
all on how to move forward even when that seems hard. We hope
you’ll listen to this episode with that in mind and think about
how you, we, and the technology industry as a whole can do better
in serving everyone in this country and in the world.


Thanks for being on this journey with us. We’re sorry for our
shortcomings, and we’re going to keep working hard to do
better. 


-Ben & David



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Anthropic: https://bit.ly/acquiredclaude25






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Topics covered include:


Introducing a new content vertical for Acquired: analyzing
IPO’s! 

Facebook turning down early acquisition offers, including
including the  famous $1B overture from Yahoo in 2006

 The Wikipedia entry on the Facebook IPO referencing it
as a “cultural touchstone”

Trading of pre-IPO Facebook stock on SecondMarket and
SharesPost

 The infamous 2011 Facebook - Goldman Sachs deal
attempting to circumvent then-active SEC regulations on number of
permissible shareholders in a private company, and Goldman’s
eventual loss of “lead left” status to Morgan Stanley for the
ultimate Facebook IPO

 Facebook’s S-1 filing on February 1, 2012

The company’s "small problem" at the time (read: gaping chest
wound) with mobile

Acquiring Instagram for $1B while on file to go public in
April 2012

Facebook’s $16B IPO finally taking place on Friday May 18,
2012, priced at $38 per share giving FB an initial market cap of
$104B

NASDAQ’s “technical glitch” (read: egregious f*&# up)
 preventing the stock from trading when it supposed to and
resulting in $500M of investor losses

Facebook’s stock tanking following a flat first day of
trading, losing 25% of its value during the first month and over
50% 4 months later, leading some to label it “The Biggest IPO
Flop Ever"

Later revelations that Facebook had  unprecedentedly
lowered revenue guidance during its IPO roadshow due to
continuing challenges with mobile, resulting in an information
asymmetry between its underwriting investment banks and their
institutional investor clients versus the investing public at
large 

How, from the ashes of its “broken IPO”, Facebook amazingly
rose to fix its mobile problem at lighting speed, going from
mobile comprising zero percent of ad revenue to 23% in one
quarter, and over 50% one year later

Zuckerberg's belief that the difficult IPO process and
"terrible first year” as a public company "made our company a lot
stronger”… and silicon valley’s bizarre, antithetical and
counter-productive take away to “stay private longer” 



Followups:


 The scoop on Microsoft’s use of foreign cash to buy
Skype, thanks to longtime listener and friend Nick Seguin 



Hot Takes:


Twitter shutting down (or selling?) Vine 



The Carve Out:


Ben: Amazon employee #1 Shel Kaphan on the great Internet
History Podcast

David:  Connectography: Mapping the Future of Global
Civilization by Parag Khanna