Two Weeks Later, What Mark Zuckerberg’s IPO Move Means for the Future of Tech

How will the social network’s IPO impact the tech startup space?

by Hajj Flemings Posted: June 1, 2012

Harvard University dropout-turned-tech tycoon Mark Zuckerberg rings NASDAQ opening bell from Facebook’s headquarters in Menlo Park, Calif. (Image: Facebook)

I am not a financial analyst; however, I have a thing or two to say about Facebook’s IPO.

The social networking site, led by 28-year-old Mark Zuckerberg, completed the most anticipated tech IPO in U.S. history.  Facebook’s stock opened at $42 a share on Friday, May 18, and by the end of the day the enthusiasm was gone, and most people, retail traders in particular, were deflated because the stock dropped to $38.23 a share. Since the IPO produced $16 billion for Facebook and early investors, shareholders expected the stock to increase on the first day. Based on yesterday’s trading, the stock closed at $29.60, close to $10 less than its original IPO price. It’s safe to say things are not going according to plan. But what does this say about the future of tech IPOs?

Facebook has 901 million users, a value estimated at $111 per user. With reported revenue of nearly $4 billion in 2011 and expected revenue of $6 billion this year, as well as a valuation of $104.2 billion, according to Bloomberg, how can the social network live up to the lofty expectations being thrown its way?

The IPO is based upon potential—the thought (and hope) that somehow Facebook will find a way to monetize their users to justify their valuation. Recently, Lynnette Khalfani-Cox put things in perspective, commenting, “While I think Facebook is a phenomenal platform there are doubts about its investment prospect to make money!”

Last year was the year of the tech startup IPO with Groupon, Zynga, and LinkedIn going public. This year was supposed to follow suit, taking the “social era” to a new level with the Facebook IPO.  While there are millions of users, does this translate to a sustainable business, or are people too emotionally invested in the hype? As a co-founder of a tech startup, I am watching the stock price flounder like everyone else with the hopes that things change because of its impact on the future of the tech startup space.

At the end of the day, Zuckerberg is a smart man.  Everything he does is calculated.

ACROSS THE WEB
  • RandyJMitchell

    Facebook’s stock price is floundering because it was never worth $100 Billion. 

    This is a classic example of HYPE ruling the day. We need more common sense, balance and patience, and HEALTHY Optimism, things that can lead to economic sustainability. Hype is not sustainable, its a cycle of BOOM & BUST that makes a few people INSANELY rich while leaving the rest of the market wanting.

    Users/Consumers, Angels, and VC’s are all investors, stakeholders, none being more important than the other, a symbiotic relationship, with each part investing it’s own unique capital. Some invest time through consistent use of a product or service, others invest money. Facebook’s IPO was a Zero-Sum Game with Facebook’s early investors taking 100%.

    What does all of this mean for the “Future of Tech”? I hope it means that we learn to get valuations right. I hope it means that as Founders and Stakeholders we realize that we are capable of doing better. That we should expect more of ourselves and the company’s we build and invest in as well as accept the social and economic responsibility that comes with it.

  • http://twitter.com/RandyJMitchell Randy J Mitchell

    Facebook’s stock price is floundering because it was never worth $100 Billion. 

    This is a classic example of HYPE ruling the day. We need more common sense, balance and patience, and HEALTHY Optimism, things that can lead to economic sustainability. Hype is not sustainable, its a cycle of BOOM & BUST that makes a few people INSANELY rich while leaving the rest of the market wanting.

    Users/Consumers, Angels, and VC’s are all investors, stakeholders, none being more important than the other, a symbiotic relationship, with each part investing it’s own unique capital. Some invest time through consistent use of a product or service, others invest money. Facebook’s IPO was a Zero-Sum Game with Facebook’s early investors taking 100%.

    What does all of this mean for the “Future of Tech”? I hope it means that we learn to get valuations right. I hope it means that as Founders and Stakeholders we realize that we are capable of doing better. That we should expect more of ourselves and the company’s we build and invest in as well as accept the social and economic responsibility that comes with it.

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  • Butlerceo

    I am both a Technology Professional and a Finance Professional and this IPO was driven by the interest of those who wanted to cash out.  Zuckerberg took a very passive role in the pricing because that was not a priority for him.  He believes in leaving the areas of expertise to the experts.  I remember that Bill Gates took a more active role in the pricing of Microsoft in pricing it lower than the Investment Bankers wanted.  The higher the IPO price, the harder it is to manage expectations.