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10 Reasons Why Facebook’s IPO Timing was Brilliant Strategy

Facebook’s executive staff showed its genius yet again this week with its IPO strategy.

Pundits have been less-than-impressed by the lackluster performance of the stock on its first day of trading (it gained just 23 cents by the closing bell), but there’s quite a lot of upside to be noted.

1. At $38 per share, the stock was priced at its high end.  Doubtless many of the managers would have liked  to have seen it start a little lower to ensure a quick first-day profit, but that wasn’t in Facebook’s best interest.  The company showed that it means to be in the driver’s seat by pulling the maximum possible value out of the offering.

2. The offering was managed by just about every major Wall Street firm, ensuring that few, if any, of the big name money managers have any reason to feel slighted.

3. The high valuation keeps investors committed.  By reaching for the high end, Facebook made sure that none of the managers or investors could stage an easy run for a quick first-day cash-out.

4.  The Friday IPO keeps day traders out of the equation. Certainly, there was some day trading taking place after the initial half-hour or so, which was dominated by millions of computerized transactions.  By closing the trading for the weekend, Facebook avoided the potential for a massive, irrational, week-long scramble…or the potential for an disillusioned sell-off at the end.

5. The weekend close also avoids the possibility of sustained programmed trading that could have embarrassed the money managers.

6. The weekend reprieve allows everyone a chance to rationalize the activity. If the valuation is too high, the market will correct it in a rational way. Facebook is already large enough to take the hit without feeling much pain and an early correction would keep too many others from being hurt as well. Those who were willing to take the early risk get what they asked for.

7. Facebook starts using the money right away, sending a clear signal that the company intends to make good on the IPO by acquiring revenue-producing startups such as Karma.

8. Eduardo Saverin had enough time to find a good hiding place in Singapore.

9. Mark Zuckerberg could afford a suit and tie for his wedding.

10. Mr. and Mrs. Zuckerberg get a nice honeymoon. Anywhere.

One comment on “10 Reasons Why Facebook’s IPO Timing was Brilliant Strategy

  1. Matthew Quint
    May 20, 2012

    Timing of the IPO is not as important as the long-term view. The real question is how will Facebook build future revenues and profitability on an ongoing basis.

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This entry was posted on May 19, 2012 by in Art of Communication, Tech Trends.
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