Skip to main content

Facebook IPO - the new normal?

It used to be that an IPO was:
  1. The first major liquidity event for shareholders
  2. A means to raise growth capital
  3. The first time a company was "market priced" due to (1).
Because private market trading is now so prevalent, even small companies can achieve liquidity early in their lifecycle, with significant trading volume.  This also means that the companies will have fairly accurate market pricing.  If anything, they may be overpriced as the private trading system attracts earlier, higher risk investors.

The secondary markets also provide a means for companies to attract early growth capital...with a lot less hassle than an IPO.  Companies will probably stay on secondary markets until they are more mature, meaning more of the upside value will have been realized before they go public.

This is certainly the case with Facebook.  They are mature, they are profitable, and they raised a lot of their growth capital already.  The IPO (rumored to be raising $10B) is more about establishing a war chest so that they can compete with existing war chests (Google, Microsoft, etc.).  The evolution to the social web has just begun, so this is a smart move.




Popular posts from this blog

Timed math tests

You have 3.2 seconds to figure out the problem below. Alan knows 90% of the concepts behind the math test, and can do those 90% very quickly.  He always gets 90% on timed math tests. Bob knows 100% of the concepts, but is a slow worker.  In the timed math test, he gets 75%, but, if given an extra 10 minutes, would get 100%. Alan graduates with an A; Bob with a C. You are building a bridge. Who would you hire? Seems like everyone from Gates to Zuckerberg has problems with how education is carried out today.  I wish I had some of their clout and could help to change the system.
Post a Comment
Read more

Decentralization, Democracy, and Well-Being

Those of us raised in Democratic societies take it for granted that those societies provide better well-being (for common individuals) than other forms of governance. At the heart of democracy is personal freedom and autonomy, backed by the rule of law. We also take for granted the interplay of decentralized versus centralized authority. Decentralization can mean many things, but here we refer to it in terms of power, authority, and decision making. The more authority individuals have, the more decentralized the power system in which they are operating.  Almost by definition the more democratic a system, the more decentralized it is, with the caveat that some agreed upon axioms exist, such as the rule of law and its enforcement. Of course, authority can be too decentralized leading to "every man for themselves", so we put limits on decentralization through that same rule of law. With the advent of decentralizing technologies , which make possible more decentraliz...
Read more