Facebook Not Feeling Friendly With Nasdaq | Hacker News Reader

Facebook Not Feeling Friendly With Nasdaq

dealbook.nytimes.com

49 pointsnohup37 comments

One thing I don't understand is why the media portrays Facebook as "botching" its IPO. If anything, didn't the company make out with a better deal than their market value? How is this bad for Facebook? It's only bad for investors, if they invested in Facebook before its market value dropped, right?

Also, I'm sure the investors and underwriters knew that there's a significant amount of uncertainty and risk when investing in new technology companies, especially with industries that have never been around before.

I feel like this is just the media circus trying to blow things out of proportion.

It is referred to as botched because it actually was - NASDAQ actually broke during the initial day of trading. Initial start of trading was delayed, then trades went through didn't get confirmed for -hours-, which is something of a disaster. This isn't some figurative use of the term, nasdaq actually failed in the objective sense.

NASDAQ's chief basically saying his company sucked: http://www.bloomberg.com/news/2012-05-20/nasdaq-ceo-says-poo...

You're forgetting the part where NASDAQ told every major player to sell the Facebook shares they had, if they wanted to get in on some of that 40 million in compensations (you had to fill in the sold-at price on the form, or forget about it).

Can you clarify or provide a source?

It's not clear what you're saying, or why it's bad. If you're saying that traders need to have sold shares to get compensation, well, should NASDAQ just compensate everyone who says they didn't sell shares but were planning to, cross their heart and hope to die?

If you are arguing that you were damaged specifically because of technical glitches associated with the IPO, you are expected to sell the shares. Any price action after that is due to factors outside of NASDAQ's direct control, and there's a sense in which you are taking risk by continuing to hold.

(Otherwise, everyone would sue whenever a stock price moved -- shareholders complaining when prices fall and short parties complaining when prices rise)

http://www.businessinsider.com/exclusive-qa-a-hedge-fund-man...

Many solutions available are better than the one that NASDAQ implemented. For example, they could halt trading when they realize their matching engine doesn't work.

Edit: Thanks to the responses that pointed out that the 500 private investor limit did not force the IPO, just a pile of disclosure requirements and other restrictions; apparently some of the news sources I'd originally read had not quite grasped that point either. The main point still stands, though: Facebook had a larger-than-normal set of private investors and brokers that did quite a bit of trading at IPO-time.

Facebook had a relatively large number of private investors, enough to trigger additional restrictions regarding reporting and disclosure. Facebook hadn't intended to exceed that limit, but hit it anyway due in large part to new restrictions that prevented intermediaries such as brokers from letting many downstream customers count as 1, as well as people reselling their shares on secondary markets to extract value from them.

Those same private investors and brokers did quite a bit of trading when the IPO happened, much of it not to the benefit of Facebook.

Facebook was not required to go public.

I've posted this many times, including http://news.ycombinator.com/item?id=3753915

They were required to make disclosures but no one forced them to go public. Plenty of companies have more than 500 shareholders yet still opt to remain private.

> Companies with more than $10 million in assets whose securities are held by more than 500 owners must file annual and other periodic reports. These reports are available to the public through the SEC's EDGAR database.

A company forced to file these reports essentially has all the costs of being a public company. There's absolutely no reason not to go public at this point, to benefit existing shareholders. The average op-ed writer is ignorant about finance but this is what is meant when informed people talk about companies being forced to go public--they're forced to take on all the costs of being public, so might as well just IPO.

They are forced to take some of the economic costs of being public, but the managers have much more flexibility when the company is private. For example, Facebook's acquisition of Instagram would not fly if FB were public when that happened.

You can argue that the paperwork is onerous, but its paperwork. The headaches involved with public companies go far beyond a few paltry reports.

Not at Facebook. Zuck still owns a majority of the voting shares. The board has almost no teeth an couldn't have stopped the Instagram transaction if it wanted too.

> ... the managers have much more flexibility when the company is private. For example, Facebook's acquisition of Instagram would not fly if FB were public when that happened.

Is that really the case? In other words, what additional restrictions does a publicly-listed company have that privately-traded companies do not have?

Your comment seems plausible, but I could imagine that the SEC regulations around > 500 shareholders etc. could also include all the shareholder protections we associate with public companies, as well.

Additionally, I wouldn't be surprised if Mark Zuckerberg's controlling interest in FB had some sort of an impact on what regulations apply to the company.

Presumably there are some advantages to remaining private since there are plenty of large US corporations which choose to do so:

http://www.forbes.com/private

I couldn't find any reliable sources for what the advantages were though.

Thanks for the correction. Various news sources have made the same mistake, and I must have picked it up from one of those.

Please stop shouting.

Please accept my apology for shouting.

Many threads regarding the Facebook IPO are littered with people repeating the same idea that Facebook was forced to go public, based on a faulty understanding of SEC regulations. And no one, especially late stage YC companies, should feel pressured to IPO.

"For more than two decades, Silicon Valley has played a vital role in Nasdaq’s evolution,” said Joseph G. Christinat, a Nasdaq spokesman. “Nasdaq will always strive to be part of the Valley’s start-up ecosystem."

Maybe the Valley needs to start its own exchange.

It has been proposed and it is already being counter argued: http://www.forbes.com/sites/stevedenning/2012/06/29/is-long-... (look under A long-term sharemarket?)

Now THAT would be a disruptive product.

Especially if it were run by non-typical "Wall street suits" types.

Paging Elon Musk? (Nah, kidding, he has more important things to focus on)

This is quite an interesting thought.

How would this work? What would need to be done.

Pros, cons?

The roadmap is fairly clear. You would first have to set up an ATS (which really doesnt require too much, but it does involve regulatory and paperwork hurdles)

The main advantage is that you can disrupt the exchange business. The disadvantages are many, including having to deal with SEC etc.

Interesting idea.

Anybody know what's involved in actually doing that?

Is it just a matter of filing some paperwork with the SEC and then convincing enough people to use it?

Facebook needs to stop blaming everyone else for their failed IPO. NASDAQ didn't cause people to dump the stock days after the IPO. No, those were caused by stories of FB's overvaluation, GM pulling out and their inability to monetize mobile.

NASDAQ telling the market "you have until noon Monday to prove your losses" most definitely did cause people to dump stock in the first two days of trading. Confusion over whether trades were happening because NASDAQ wasn't confirming orders probably caused investors to be skittish, which could easily have had cascading negative effects.

It's hard to say if FB's stock was overpriced. The GM thing couldn't have helped. But to say NASDAQ had nothing to do with it is silly.

I look at FB's IPO and think of this[1]. Little (and not so little) permutations causing shockwaves through the system.

1. http://www.youtube.com/watch?v=Suugn-p5C1M&sns=em

Facebook feels manhandled? Now it knows how it's users feel when it: changes privacy settings, makes profiles public, sells information to advertisers, tracks browsing habits outside of Facebook, and comonderes e-mail addresses. Fuck you Facebook. Your little butt-hurt whining means nothing to most people as you made billions off the deal anyway.

Seriously, Facebook screwed many people over in its short life. I can't help but get a little satisfaction out of their IPO issues and lower stock price.

Maybe if they at least pretended they gave a shit about anyone other than themselves they'd get more empathy from guys like me.

Boo hoo.

This seems like a lot of hostility and resentment for a voluntary, user-generated-content website.

You say that like there are many other choices. I joined back when only colleges could have access, and it was a safe place to talk to your friends and post your party pictures from last weekend.

It has "grown", but also has muscled out any competitors through various means. Facebook takes full advantage of their network effect and to me that feels more like a bait-and-switch with a gun to my head.

Are you saying that you feel you have no choice in life but to maintain an active Facebook account?

That is fascinating. And concerning.

I do say there are many other choices, but if you feel there are none, our situations must be vastly different. I have no idea how someone could feel that they need Facebook.

This is just a giant distraction from the fact that Facebook illegally disclosed select data about results to insider investors the week before the offering.

FB needs to focus on other things, rather than keeping the "failure" association in the minds of investors any longer than it needs to be. Changing to NYSE or whatever would be a huge waste of time. Markets are forward-looking. The primary message from investors is "we don't think you can make us money", not "we think your first-day market action remains terribly important, and we'll buy every stock you can sell us if you change exchanges".

So fix the real problem. If you fulfil all the potential we keep hearing about, investors will find your listing.

Everyone is blaming NASDAQ for issues that are not inherently NASDAQ's fault. The IPO "flopped" not because of the exchange but because demand wasn't there. Switching to NYSE won't magically change the price (and I'm pretty sure the price would have fell on the opening day if they listed on NYSE).

Don't you think you should provide some evidence for your claim?

Which part?

"Everyone is blaming NASDAQ for issues that are not inherently NASDAQ's fault."

The IPO was delayed during the day because of Morgan Stanley (asking customers not to dump at the open). NASDAQ is not buying shares and hence is not required or expected to bring demand to the table.

The IPO "flopped" not because of the exchange but because demand wasn't there.

That demand wasn't there was established in many post-mortem analyses. Do a quick google search.

"Switching to NYSE won't magically change the price (and I'm pretty sure the price would have fell on the opening day if they listed on NYSE)."

For the venue to have changed the price action, the initial demand would have had to been restrained by the technical difficulties. However, given that customers at various retail brokerage houses were able to get shares in the hours leading up to the IPO, I would chalk that up to a dearth in demand.

It's been well-documented that many orders went unfulfilled for hours on the IPO day. That's the whole point of this article. Other than pointing to Google, what's your substantiation for this claim that the massive drop reflected the market's lack of confidence in FB's valuation?

For example, search for "facebook earning estimates before ipo"

http://www.reuters.com/article/2012/05/22/us-facebook-foreca...

> In the run-up to Facebook's $16 billion IPO, Morgan Stanley, the lead underwriter on the deal, unexpectedly delivered some negative news to major clients: The bank's consumer Internet analyst, Scott Devitt, was reducing his revenue forecasts for the company.

I'm sad the Google/WR Hambrecht OpenIPO thing wasn't even a consideration for Facebook.

I'm shocked FB is still trading at P/E = 99. This is pure insanity. It's going to collapse right after the first earning announcement.

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