In Facebook Deal, Board Was All But Out of Picture | Hacker News Reader

In Facebook Deal, Board Was All But Out of Picture

online.wsj.com

69 pointsanswerly49 comments

Interesting. Kind of touches close to a thought I had when I first heard about the deal... Board aside, what kind of signal did the acquisition send to Facebook's rank-and-file?

There's plenty of extremely talented people who joined the party too late to have any significant options. Now everywhere they go (including home, private, and social lives...) they can't escape hearing about the gold mine that was just dropped on Kevin and crew.

You literally can't escape this news in the connected world. Can't help but wonder if that's weighing on morale at all in there.

Yeah, i don't usually read papers but on the few occasions i did, that week, it was hard to escape :D

I love what this says about Zuck. It takes real conviction to make decisions this big and this fast. Most people would feel the need to build a faux consensus of people around them for moral support.

Same thing that let him say no to his own $1 billion acquisition offer I suppose.

He's 26. He went straight from Harvard to Facebook. He still effectively controls Facebook. And he's a billionaire. I don't think he really can take a risk, in the sense that a normal person would think of a risk. As long as he doesn't do something blatantly stupid like run in front of a bus, he's probably set for the rest of his life. Instagram deal not approved, or approved but doesn't "work out"? Shrug. Still a billionaire. And I'm sure he's taken a lot off the table already so even if Facebook's value plummets, he should still be gold.

You think he doesn't have much to lose because at the end of the day he's still a billionaire. I doubt he feels like that. He's got an opportunity to succeed in ways most humans never do. You could argue that he's got more to lose than most, not less.

Full article: https://www.google.com/search?q=In+Facebook+Deal%2C+Board+Wa...

Doesn't work for me; WSJ must have shut it down.

Though Google cache pulled through, at least for now:

http://bit.ly/IIBabu

There is no need for shortened links on HN.

The cache link was crazy long. Would HN have auto-shortened it?

HN displays only parts of long URLs followed by ..., for instance http://news.ycombinator.com/BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB....

WSJ seems to have made a recent change to stop the old search-for-the-title-in-google trick. If you visit the article first and then leave and come back with google referers it doesn't work anymore. But if you've never visited the article and you come from google it does show it. Even when you delete your cookies and then try to come via google it won't show the article. That means they're using flash cookies or some other insidious persistent cookie technique. Not sure if this violates Google's terms.

Have you tried deleting your cache? The simplest explanation for this behavior is that the old redirect was cached. It could be something more insidious as well, of course, but that would be... evil.

Incognito mode in chrome seems to evade whatever form of tracking they are using.

Works for me, thanks! :D

Well, this has been evident for a long time. Mark Zuckerberg intends to rule Facebook, not by consensus, but by himself. When Zuckerberg was forced to make an IPO, he did everything in his power to minimize outside control. I also believe(not sure about this), that Zuckerberg still retains majority control of the company.

Yep, he owns 28% of the stock but 57% of the voting rights, according to the article.

Just as matter is never created or destroyed but merely changes form, so it is with Steve Jobs.

Have to admit that this increases my respect for Zuck. It breaks with the current trend towards this consensus seeking, "collaborative" management ideal, that sabotages bold moves.

I would really be surprised if this didn't affect the IPO. Why would people put money into a business with corporate governance this poor?

You can't say yet whether it was a poor choice. Instagram was a very credible threat to Facebook. Its growth curve and primary use bear a strong resemblance to Facebook's.

People laughed at Google for buying YouTube for $1.65 billion. Now every single big company wishes they had done it instead.

You're missing my point; I'm not questioning the decision but the process, the governance. The board is there to represent shareholder interests, if they get bypassed like this on a decision this big, then what is the point of them being there?

I think it was Sergey Brin who recently said something about an investment in Google being a long-term bet on his/Page's decision making. It's like the world has suddenly forgotten why businesses are structured the way they are.

To make an unrelated, more controversial, point: if a CEO can take arbitrary, unilateral decisions, it's difficult to see why they should benefit from the protection of corporate liability.

They weren't bypassed. The deal was brought to them by the CEO for ratification. It will be subject to extensive due diligence, like any deal such as this is. That's exactly how it's supposed to work.

There's nothing "arbitrary" about his decision to buy Instagram. And the fact that he makes decisions like this shouldn't be any more cause for concern then the fact that he makes decisions about whether to buy hundreds of millions of dollars worth of servers, hire 5000 more employees, or whatever.

The board is there to advise and prevent malfeasance -- not to run the company.

Complaining about how some of the most successful companies in history are run (Google/Facbook/Apple/Microsoft) is rather odd. Do you really think their shareholders would be better served with boards like HP's?

The board is there to advise & CEO and provide support, and step in if things go wrong.

In this case it's worth noting that the CEO is also the largest shareholder, so it is difficult to argue they weren't representing shareholder interest.

Zuckerberg obviously doesn't give a shit what public investors think, and rightly so. You can't lead a world-changing company in growth stage by kowtowing to what "the market" thinks. Instead he will do what he thinks is best for Facebook, and if it works, the stock price will go up, if it doesn't, it will go down.

post-IPO, if he simply "does what he thinks is best" without board approval and the stock price goes down, he'll get sued by shareholders

Who said anything about "without board approval"?

The IPO structures the company so Zuckerberg has ultimate control anyways. He has 28% of the class B shares (which are 10x the votes of the class A shares being sold in the IPO).

"Mr. Systrom was just hours from signing a deal for a $50 million venture-capital investment that would put a $500 million value on his company"

So this started before the deal was closed. Did the funding round close?

Yes, the round closed the day before the acquisition, iirc.

that makes the IRR a crazy 1.33x10^3175% [1]

funny that they would only need to let their investment ride into equivalent investments for another 21 days before reaching a return of 209 Trillion dollars, which is in excess of the total value of all stocks, bonds and currency in the world.

[1] http://www.wolframalpha.com/input/?i=%3D+%281+billion+-+500+...

Odd as it may seem, this is not necessarily great for the VC's. Most VC funds only get to invest each dollar once; when it gets cashed out after an IPO or M&A event, the returns go back to the investors. I'm not sure if this money still counts as being under management for purposes of their 2% annual commission; if not, then it's almost certainly a bad deal.

Many funds have provisions for recycling (ie calling a given dollar twice instead of just once) that address cases like this that are quick flips.

One other note - for the first five years of a fund (typically), the 2 percent fee is calculated on committed capital not invested capital, so an event like this has no impact.

I don't think they can sell the Facebook shares yet, so I don't know if that calculation is correct.

Stupid pay wall.

To view any WSJ article, search Google News for the exact title. WSJ has a deal with Google to let visitors view the entire article.

Great tip thanks!

link: https://www.google.com/search?q=In+Facebook+Deal%2C+Board+Wa...

Is this only true for US visitors? It still doesn't work for me.

Works for me from London.

Works for me from the Netherlands.

Deal? Or is this an artifact that Google doesn't index content behind a paywall so WSJ has to display the whole article to the Google spider and anyone who's refer is Google. If WSJ (or anyone else) doesn't want to lose the search engine traffic they're force to do this.

Right, and as of right now (past midnight MT) that trick isn't working any more.

do it through Google News:

https://www.google.com/search?hl=en&gl=au&tbm=nws...

try running the search manually yourself.

I had a feature in on of my chrome extension that would do this automatically but it was too flaky to release - but I did find that referrals from the news site worked most of the time.

No, they don't have to do this for anyone who's referer is Google. They could do it for just the Googlebot.

Doing that will get you removed from Google's index, or at least severely penalized.

It's a Google policy called "First Click Free":

To implement First Click Free, you need to allow all users who find a document on your site via Google search to see the full text of that document, even if they have not registered or subscribed to see that content. The user's first click to your content area is free. However, once that user clicks a link on the original page, you can require them to sign in or register to read further.

http://support.google.com/webmasters/bin/answer.py?hl=en&...

It's amazing that the Instagram guys started negotiations at $2B. I guess when you're talking to FB you just pick a huge number out of the air. Why not $5B?

It's in the article (see google cache). They were about to be valued at $500M in the next round of investment, during the next week. Zuck had to move fast, and he did. He bought them 2 times the supposed valuation, which is probably what Instagram expected.

(PS: Negotiation 101, start with a number 2x bigger than what you expect)

I really wonder if there's any favor factor in this deal. The deal is too good to be true.

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