The Facebook IPO - a tale of Greed

The Facebook IPO has been a classic case of greed - the underwiters, the management, the ordinary investors (though they were misled some might argue). The night before the IPO I had an argument with a few friends as to why I thought the IPO was overvalued - $100 billion didnt make sense on a profit of about $1 billion or so! Particularly when its usage was declining slowly both in terms of membership growth and in terms of time spent by members. More fundamentally it doesnt have a revenue model that was driven by users - it was driven by ads (unlike google which makes money everytime someone clicks on a paid word). Also - Facebook's management team had made some questionable choices about user privacy, about their own stock holdings and about their ambitions - all of which made me feel - this is no managemenmt team with a Higher Ambition - this is a team that wants to make money and lots of fundamentally. And now its VCs are selling their stock - they and the founders are the only ones that made money on this. The investment bankers also did a major disservice to the entire public by pricing the stock so high and by having such a large volume of shares available as part of the IPO. They were downright greedy and stupid. Lesson - Greed is never good.