Facebook IPO: Tech Culture
Tech Culture: Facebook IPO28:00 /
All-star cast discusses Facebook IPO shortly after the opening bell.
Hi everyone welcome to reporters' roundtable -- I am -- -- and in San Francisco and it has happened. FaceBook is now it publicly traded company. Internet IPO ever. FaceBook is going public today is becoming a company worth over 100. Billion dollars and -- just eight years after restarting a humble Harvard dorm room. Facebook's IPO will change the economics of the Internet. Not exactly a cash poor company before the IPO. The new public funds lining Facebook's pockets will mean the social company has extra money to launch new projects and buy up companies that mesh with its mission or compete with it. Will the frenzy for FaceBook stock last -- social network make money the way Google -- which is hand over fist. And is this a stock you should be buying today. Alright guys were here in at reporters' roundtable special live show him to -- -- quite -- while -- be talking about this IPO. Should you buy it or not got -- -- a couple of great guests to talk about it first of all Jill Schlesinger from CBS money -- -- joining us over Skype -- help sort this out. With help us sort out the pros and cons -- investors' interest in this IPO thanks Joseph for -- the time. -- -- -- is the CEO of wealth front and Internet era investment advice service I got that right yeah I've covered the company's fascinating Andy's a venture capitalists that benchmark capital also teaches about -- -- -- at the Stanford Graduate School of Business. And he wrote about Facebook's IPO for CNET. On -- -- in February Andy thinks the time and -- Joining -- also over Skype Tom Merritt the host of the tech news today show on the twit network of course -- also former CNET podcaster here for buzz out -- Tom thanks for joining us. I was going to be with earth. And -- if you have a question about -- IPO for this panel ascended to us on the -- or an email roundtable at cnet.com or send a -- -- at Rafe in the tweet in the hash tag count FB IPO and hopefully -- But we're gonna get started here with another guest a little FaceBook stock weather report. -- Paul Sloan is joining us here he is our exact head who has been -- -- on the -- right DO coverage. Paul -- what's happening when the report her traffic -- -- here's here's what does this mean when is it means -- to -- it at the opulent you know. The stock is up modestly but. You have to think that the bankers here in a little bit of panic -- I mean bankers I think you can tell me and if I'm -- like to -- a little more of a -- and -- can't exactly -- deal when -- -- is large so the stock went public at 38 went public at 38 which ranks higher than expected they -- raise the -- -- couple days ago. Demand was off the charts -- that people tried it was all kinds of skepticism you know. Bad news in General Motors in when the ads are working -- lot of insiders of you know taking money off the table. And yet you know and and that demand has been really strong and so -- it -- Pulled off an incredibly successful IP -- now it just hasn't hasn't popped out of it out of the gate is -- in the 1990 -- now so the stock right now is that forty point 83 which is. A seven point 4% -- since since opening who makes money -- -- stop pops up Andy. Well the underwriters typically place -- stalk -- institutional investors to. And the intent is to give the institutions -- -- of a toehold position that -- wanna come into the market after the IPO goes effective and by bigger positions but some of the institutions run so much money bit it's not worth it. Even to have a -- positions so they're going to flip the -- and then there -- going to be the primary beneficiaries. Of that rise initial rugs and. So agility performance like this. Up right now where forty point 99 at some point some percent boy this is so exciting -- can barely contain my. Jill what does this mean what does this seven point 8% rise in net in -- Internet IPO mean forward the -- the retail investor. I think it started it take his most retail investors did not IE 838 so. Really used to say it's actually. Trade agreement called it that dumb they got in after that act they're the ones who are people sharing. -- forty to 43 when it earlier but for the most retail investors you know I don't. Such. As you know today -- being sent them or by the way. I just buying index -- gonna have a start getting it. And you just know that even in the last seven deals done in this past year. While stocks have -- a lot for -- -- to -- down 11%. On average a month after the IPO. Wouldn't that at any age but actually built below the offering price it would be like all the hype -- nothing -- -- kind of fun right it. Is that a big deal with FaceBook follows falls below offering -- is for the media. Does the important thing in the end of the confidence that you're the only person here Andy who is not does not have immediate job -- I think that it creates some artificial pressure for the management team that they have to field a lot of questions about why is this thoughtful offering place. But if you think about it when you sell -- -- want to sell it at the highest possible price to give up the least amount of pollution. And so there's a tradeoff between. Selling its Ohio that this -- might go below the offering price. Uganda and then -- having the pop because people think well if it doesn't go up 50% it wasn't successful underwriting. You know Google was perceived as I am successful underwriting because the Stockton -- on the barrier for -- PO. We did pretty well. Now Tom new contract even in this industry almost -- -- I have -- been tracking this stuff wherever how exciting. How important do you think this IPO is. For. -- for technology companies. Well it's it's one of those benchmarks. -- you know we've we've seen Zynga -- -- group bonds and solos but FaceBook is is one of the big companies it's the one you talk about all the time it's up there now with Google and Apple and Microsoft and at least in and being at newsworthy and being of interest and it's got 900 million users so it's huge. I think a lot of people were keeping their eyes on this to see. -- A big company like that is going to fare in the current IPO market when we've seen the group bonds -- the -- -- as a -- pop out go way up in the drop below their opening prices as -- mentioned and would FaceBook. With their momentum being able to -- that we've seen a lot of mixed signals. FaceBook raising that opening price but at the same time a General Motors coming out just a week before the IPO and -- more not -- spend any more advertising money and -- -- Now. I may have a unpopular view hear on this particular IPO but I'd like your comments that this -- panel's comments on this perspective which is that. If a stock goes out at 38. Jumps up to the low forties and then hovers around 38 for a while. It seems to me that indicates that the stock was accurately and correctly price that we don't want to see. A stock doubling or even going up 50% the moment it goes public that means that there has been money left behind that -- -- Judged what the company was worth so I look at this and I think the underwriters did the job. -- you must've worked for -- I never left I know nothing about economics and I think journalist. I think its ability fear statement and the only thing that keeps companies from pricing significantly below the fair value is -- want to reduce the chance that sometime in the future. The stock trades below that price but thought I would a completely agree -- Rafe. The fact that the stock is up -- 8%. Is a testament to the quality of the Java and -- and -- have done. Okay yeah -- looked -- -- jewels are. It's not a bad thing I want it you -- -- they didn't raise arranged senator and me if we got to the original. -- range of this up before they went on the road show it being. -- at -- 2030%. Are likely. That it priced right ensure that everybody at work and Stanley's dance in. 176 million dollars at east is among those 33 underwriters -- I think probably after ace -- in Belize and in an early investors. The investment banks it happens to. I mean for sure it helps that it's priced at night when I said there was panic on the investment -- -- earlier today was treating right around 3839. It wasn't exactly -- pop I think obviously was a huge success for FaceBook. I mean it seems perfect for them but a I think from the bankers' perspective they don't want they don't not want to see only and it just makes it that implements they wanna see that the excitement so there. -- can I give you one other perspective. That -- pure consumer and an -- company or consumer company in general and your net on everyone's radar. Then having a big cat and your stock price is a really good thing to have -- it means that you left a little money on the table but the marketing value of having the stock -- up fifty or 80% is invalid are useless. And so -- -- -- much lesser known Internet 4 AM having thought everyone report on the big captain Mario IPO price. We'll get me press that I never could have gotten otherwise and can build momentum. In my business. Now if I'm FaceBook I don't -- is done right so I. I have an incentive to price that much closer to the field value because I don't really need that -- as much as a lesser known -- -- Now everything we know about Zuckerberg says that he's very hands on with stuff that many entrepreneurs and CEOs would not be for example. Booting the lawyers out of the room when he was doing via him -- -- -- Tom what's your sense of how hands on this particular CEO is with something as arcane as dealing with the stock market. Well. I don't have much of -- a sense of it directly I don't have any direct contact with FaceBook but just from watching. The roadshow and and the controversy about the -- and him sort of Bao -- out of a couple of the appearances it seems like he's really more concerned with coding out last night they had a -- on Toledo after the IPO he wants to run the company he was to work on FaceBook and this is somewhat. It least it seems from the outside a bit of a distraction. For him that he's happy you know he's he's glad that -- public and they -- bringing in the money but he is consolidated control of this company remember those class B shares that current owners have pre IPO -- ten times the voting rights he's gonna have -- and byte different accounts 54 to 56%. Of the voting writes over the company even after the IPO so. I I think this is something he felt he had to do he put it off as long as possible I bet he's glad he's done but it. So. If I think you're never once you go public -- it that's the deal the W never get out of that do you. Mean that. Besides and -- can bring it back and it grabbed the edited -- -- back from the public again so forget about it. How is FaceBook going to change now that it. Despite Zuckerberg ownership of all the voting rights essentially -- must FaceBook change now that it is a public company. I don't think it needs to change at all you -- I think there's this misperception. That in order to run a public company you have to satisfy the shareholders -- bought your stock last week. The -- CEOs I know. The most successful ones who've been able to transform their companies over time run their public companies like private companies. We worry about what's best for the company over the long term not what's best for the people who bought the stock yesterday. -- -- -- Google an example of a company that does yeah I would think Apple is an example Veritas software was an example Adobe was an example. So they they will do what's right for the long term business. And they don't pay that much attention to what the short term investors want to do you went -- I don't think that's a breach of one's fiduciary responsibility. Just because you ignore the short term is there a lot of constituents -- -- enough to worry about. Now one at the speaking of short term one of the very interesting news items of broke this morning after FaceBook went public was that -- Zynga stock. Fell off a cliff and infective and looks like the stock was halted and -- -- but still -- for awhile after dropping 13% of the triggers went off. -- they turned off trading on Zynga. Why would a FaceBook IPO. Causing it to drop when these two companies are basically -- my estimation two sides of the same coin of the social business. And -- this -- up for speculation. -- -- -- -- -- My immediate that like one possibility. That I trader hat on for a second I mean there is a possibility that people are basically putting -- spread on a video shorts in a minute long FaceBook -- that's a better value for me. And I got a great spread and a lot of time you know it's like saying -- long -- short Pepsi. And 88 is better value an -- that unless there is news about seeing that we just don't know. -- -- All right so let's see what's going on right now with the stock this is -- is becoming boring six point 3% a keyboard to be. I mean -- company -- -- I totally agree that. At the and we talked about this before that really it's about leadership and a good leader can navigate the company -- even if it's public and doesn't have to. Necessarily cater to the short term interest but. Surely when you have so much for your company's wealth among your employees tied up in restricted stock and over time meaning it's in it's it's helpful. If the stock does well over the next six months. Well this one inch -- things here -- how do you manage a company that goes public and make so many people so wealthy now granted they're not. We can't cash out today if I'm not -- they thought -- what it must be like. If you're an engineer face -- you've been there for three years you know have stock that is worth house money is at new money. Most of how does FaceBook keep these engineers motivated and if you are one of these engineers and if -- Ian you know if anybody here has has had a windfall -- at a company. How do you manage things -- -- -- I -- so I can tell you what best practices are and I think that FaceBook is doing a great job at the best practices are a number one. Are you spend a lot of time and preceding the IPO we're explaining that the IPO is just one step in a long term marital. That it's like -- you know when you graduate from college it's called commencement. It's the beginning of the next stage of your life. And I think that the -- we should really good leader's position IPOs -- commencement whereas many. Individual investors view it as a final outcome or the. Ultimately it's -- all -- and exit. For venture -- let them know it isn't the here but we here at the -- -- -- saying that the journalists the press made that up and nobody I can tell you that the that having been in the venture business for 25 years before our teaching at Stanford and starting -- front. We never hurts called an IP OX never. -- a different perspective on this because when I did it in best investment advisor in New England -- to get hired by some of these tech companies in 19981989. And 2000 to come in. And you face to face meetings with their employees who -- out to become. Very wealthy and a great companies with it would do they hate me someone like me they say. I don't hate you by the hour TC and to these people that they should not squander their newfound wealth and it is amazing. You know Chris so these guys would go out of -- -- -- part Apple porsches but. At -- that -- -- -- the culture out there but. It is really astounding to see that the real differences among the -- accidentally some people just like yes I just concrete jungle and going but I say that it. She got later in the cycle. Or skier is I don't want to squander this least help me and I companies and especially -- space that you're gonna be so many people who were so much money you can imagine. Pressured I would and that -- major carried with that. You know if anyone is watching who's got in this position. To make sure you secure your financial Richard -- -- something fun but it's like a lottery in that way. If you're gonna hit an -- put the money aside if you need to do everything you want to do your kids college you know your own retirement. And then of course has a lot. You don't remember a bunch of FaceBook employees or former employees -- sold for all who sold it on second market. And they have not by and large done -- things we've -- months. And I think that's a proxy. For what you're gonna see -- from the people. Who remain as employees and are likely to get some liquidity after the lock ups are released -- six -- -- It's even better -- it started companies and even -- you know a mountain in Nevada is one of the great things about it BI PO and about a lot of people having. Excess. Resources to do things like I mean if you're -- -- -- you've -- a lot of access resources used to launch a space program but if you have maybe. You -- only six speakers. Of that yeah you can you can take this money and invested back into the technology economy. And I is that's a great thing and this is how the boom and bust cycles working but in this is where entrepreneurship conference always Angel investors are well it's. Necessarily agree if you look at. Technology successes over the last thirty years -- the amazing thing is the number of companies that achieved great success. He's incredibly consistent identity. Some research in 1995 and -- -- -- in 2000. For some presentations -- Q where I found that. Only fifteen companies plus -- minus the -- -- created every year that at some point in their life reach -- hundred million in revenue. -- -- -- -- And it doesn't change. The new year but this has sensors that does so the number of companies -- is like a sign code that -- -- So I think we're gonna see a lot more money coming into potential market as a result. When the lock ups come off but that doesn't mean we're gonna see more successful companies that just means we're gonna see more of failed companies like to. And take classic as it depends you have to kind success write -- to Graham would not have made it -- your list of agreed. -- -- -- -- -- -- -- -- For the economy in terms of jobs and -- The number of companies that achieve critical mass -- real success is very consistent. And having more initial money coming in isn't necessarily gonna drug more integration as many people -- positive but instead Graham type successes drive a lot of those and that's that's -- And direct the -- talking about where FaceBook does need to innovate and where they may be making acquisitions whether there actual -- -- physician's -- called -- hires buying a small company out. But just to get the engineering talent there. Mobile. -- And the Paul -- wanna talk about. How is FaceBook going to manage the move from the social error which were in the mobile -- which -- moving into. Yet it seems to be the common consensus is that FaceBook needs to be in mobile -- is an interesting Forbes article the end of April. Saying that -- FaceBook and Google are fighting the last war. That they they need to be looking further ahead and and FaceBook struggling with mobile is evidence of that I think what we're seeing with minster Graham acquisition and with -- The acquisition of -- -- -- box folks recently is is what their strategy looks to -- which is let's go out and find people who are really good at mobile bring them into the company. And nests and let them loose and see what they can do Google just did that a very good effect with Google+ -- as it suspects. That pulling in Kevin rose's team. From milk is what. Brought out the new Google+ mobile app which has been a fantastic improvement over what they had before so I would expect to see more of those kind of -- hires. As you say from FaceBook. The other thing we hear that today -- is a big area of expansion I was you know what this -- Global presence. The news -- dividend -- there will soon be more FaceBook users in India than there are in the US. So how important how does FaceBook make the transition to being -- truly. Global company were -- the United States is just one of several markets. We did a long time ago in her. I mean for us here in the in WS. A little bit AGR eight because you -- you might end users but unique consumer -- -- -- me. And what we know is that. Some of those economies where there's an extension -- -- those people aren't necessarily song and especially that it is like China or India where they are more saving society -- -- spending society we're waiting. For that to become more bigger spenders and IP that is the next frontier but right now. Something to 840 to fifty cents of every dollar that you -- -- and finance and they are in buying -- injured. Well let me give you different perspective. So everyone's talking about mobile and I think it is critical reference -- succeed on mobile. But we're forgetting the fact that they -- the plumbing of the new -- look at FaceBook connect. Think of how many web sites use FaceBook connect is the way to get new people to come use their sites. The FaceBook wanted to do they could charge a penny a -- and every single web site I know why word would pay. FaceBook. For to have that site your tongue -- will we -- you're right side everyone's -- this and if they charged a paid me a login for FaceBook connect. Which makes it a lot easier for me is a web site operator. To offer can be immune system -- users that would be a billion dollars in operating profit -- -- So lest we forget how much of an asset FaceBook -- bill that will continue. No matter what happens in mobile. All right finally. Advertising this is where these companies make their money this is why Google is a forty billion dollar revenue company FaceBook is under two. Paul how does FaceBook turned around and advertising space. -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- I think there's so many users and there's so many different opportunities whether it's expanding FaceBook credits whether it's using mobile ticket. Off into offers local offers its group on -- offers all kinds of ways whether it's charging for -- -- connect whether it's creating an ad network outside of FaceBook. Which a lot of people would speculate it could happen. Not what you know where they create ads were maybe. You know you go to a the Washington Post site and you see an ad for a restaurant you like my friends like that one and so do all kinds of ways they can not only boost their advertising revenue but get. Other other revenues question is -- will take -- to see whether they pull it off. You know. Every disrupt -- -- wrote a book called the elevators dilemma which really made an impact on them he coined the term disruptive technology which is often misuse. But disrupt who's always sold -- product for a lower price per -- more of so if you think about this in Honda motorcycles first Harley-Davidson and mini mill steel mills if you look at FaceBook at -- -- Google text ads vs Yahoo! display yeah it's. Will FaceBook ads of a fraction of the price of -- Google ads so people always think older terrible advertising company. What the -- Google went public at the same age I think FaceBook has more advertising revenue. Then did Google sold to and around why are we talked about -- and if you're doing better than Google -- at the same age. -- went looking at a excellent pick up there. -- any final advice for people who are looking at the stop covering around 41 dollars and thinking well I gotta get in now before it goes up to sixty what do you think. Yeah I think just chill -- really no reconnect it straight now and by the way I you know for most people who are out there -- managing their financial lives. Remember you're building a portfolio of fifty stocks at money manager and you can be indexed stick with the index and by the way I don't -- -- buzz killing everyone is so psyched about this here's a huge problem lurking in our -- right now and call Europe and it's called -- so what we're eager to jump in -- cardinal he about -- Make sure you got it diversified portfolio it is going to be both be in the future and. Is pleased to -- diversified I -- -- -- -- trying to help me. Adding I do I need regular wrap up here and there and doesn't mention that they keep your time your payment for your time is tells about -- -- really briefly to Edwards analyst. Well real -- -- an online investment management firm that helps young people are initially you work in technology. Two I have -- money managed in a diversified portfolio of billion expensive. Index -- of the type that shall describe and we do it that -- a tiny fraction of the minimums. Of the high -- wealth managers like Goldman Sachs and for a tiny fraction of the feeds. Thank you cut. Always great and needed to hear your your input on this stock and others in the market in general. And of course is the CEO of wealth front Tom Merritt is the host of tech news today -- any final words on -- this or. Other exciting and a public company is. Well Eric Mack has a great article at CNET today about a programmer who's doing FaceBook IPO -- closing price dot com -- if it's already at the end of the day that it's. Too late to look at it but vice scraping Twitter he's predicted that the closing price will be 54 dollars. Odd but that we also John Perry Barlow -- -- predicting that the stock closed at 32 dollars I guess by the end of the day. We'll know whether Twitter or John Perry Barlow are better at predicting the future to make. Money and FaceBook stock it is -- the betting pools don't touch them but sort of a socket without. Jill is Joseph -- CBS money what you counsel Europe to. I am covering this story covering -- and I really all over the ST mortgage -- or reaches juicy and -- here in New York we love that kind of storage. And you can follow me on Twitter at a lot of money and -- you know financial questioning to host a weekly call -- radio -- kind of like doctor Frasier crane your money so let me know he had a question. My -- -- product and tell you that have up Paul executive editor here at CNET news -- -- on with today. FaceBook FaceBook FaceBook is faced with Leo okay you know whatever you can think you can find -- it'll be over soon it will sure. Our guys hey everyone thank you so much make the time to -- -- -- -- watching thank you Kelly for producing. You can find all the news of FaceBook and all those other tech companies on CNET news -- -- a -- in this is reporters roundtable thank you.