5th September 2012
While Facebook's stock price continues to trade at new lows (closing Friday at $18.06) – and lose market value ($50 billion in 90 days) – many are starting to point the finger at one David Ebersman, Facebook's chief financial officer (CFO) for the social network's IPO debacle. As CNBC anchor and New York Times columnist Andrew Ross Sorkin put it, in a piece that's set the internet ablaze: "if there is one single individual more responsible than any other for the staggering mispricing of Facebook's I.P.O., it is Mr. Ebersman."
According to Sorkin, it appears Mr. Ebersman "badly misjudged" the demand for Facebook's I.P.O. "He was aided by errant advice from a cadre of banking advisers, who all had an incentive to sell as many shares as possible at the highest price possible. Morgan Stanley liked $38 a share, JPMorgan Chase thought the shares could be sold for even more," he writes.
And Ebersman's central role in the botched IPO was chronicled in a piece written by Felix Salmon, the financial journalist and blogging editor for Reuters, a few days after the social networking giant went public in May. Salmon says during the process, Ebersman didn't just make one big mistake, he made three. Firstly, as CFO, he failed to accurately forecast Facebook's second-quarter figures, and thus he was forced to re-file the IPO prospectus just days before the deal came to market. Next, he screwed up by upsizing the deal at the last minute, raising the number of shares being sold by 25%. But then, after that, Salmon explains, he made his third major mistake: "he priced the deal for perfection, at $38 per share, even as big institutional investors – the only ones who knew about the new revenue forecasts – were saying that they had no real desire to own the stock at more than $32 per share."
Henry Blodget, a former American equity research analyst, who is now editor and CEO of The Business Insider, however, thinks those that are blaming David Ebersman for their Facebook stock losses are doing a "masterful job" of not accepting responsibility for their decisions. "After all," he writes, "No one had to buy Facebook…..just as no one has to buy any stock."
In addition, he says, "the market price of any stock on any given day represents the price at which willing buyers and willing sellers voluntarily choose to buy and sell–not some sweetheart bargain gift from a company and its existing investors to frenzied buyers who can't be bothered to do even the slightest bit of research to get comfortable with the price they're paying."
Mark Cuban, the billionaire investor and outspoken owner of the National Basketball Association's (NBA) Dallas Mavericks, likewise, blames investors and brokers for Facebook's IPO losses. In a piece for his blog, he writes: "As far as traders who bought the stock hoping for a pop. No one cares about them. Seriously. You trade, you know you are going to lose on trades. That is how things work."
He continues: "If the goal of the company is to maximize the cash obtained from the IPO, then the CFO should absolutely price the stock to maximize the return." Cuban, who earlier disclosed he lost money trading Facebook the month following the IPO, then goes on to say, rather bluntly: "It wasn't the fault of the FB CFO that I lost money. It was my fault."
Nathan Vardi, a staff writer for Forbes, meanwhile, believes the guy responsible for Facebook's stock debacle is not Ebersman, but rather the CEO himself: Mark Zuckerberg. "When the stock of a company plummets, wiping out $50 billion in market value in 90 days, there can only be one person ultimately responsible. While it takes a village of corporate officers, investment bankers and a stock exchange to achieve this kind of feat, it's the chief executive of the company who should shoulder the blame."
"He tried to avoid the stock market and played games with venture capitalists and Russian oligarchs…..He was not up to this management task and that has caused real problems for his company."
"Now, it will be up to Zuckerberg to learn these hard lessons and lead his company out of this mess."
Previously on The Financialist: