On The Facebook IPO

A blog about business and economics.
Feb. 4 2012 3:02 PM

On The Facebook IPO

I did a column about the nearly dictatorial authority Mark Zuckerberg will have over post-IPO Facebook notwithstanding its nominal status as a public company.

A related point that I wish I'd made and incorporated into the analysis is J.W. Mason's argument about the shifting purpose of the IPO. One reason you don't normally see an offering made on terms that are so friendly to the founder and so unfriendly to the new public investors is that the founder wants people to buy the stock. That's because the classic purpose of the IPO was for a firm to raise money. You start out with maybe some cash scrounged up from friends and family, then you have a few initial rounds of private investment, but you reach the point where your company is so hungry for capital that it needs to open up to a broader public to get what it needs. Facebook's IPO (and increasing number of other tech IPOs) isn't like that at all. Facebook has plenty of cash and can more than finance its investment needs out of profits. Going public is a means of helping early investors and early employees cash out, not a way of raising investment capital. That's fairly typical nowadays, but it's at odds with the classical account of what the stock market is there for.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.


Frame Game

Hard Knocks

I was hit by a teacher in an East Texas public school. It taught me nothing.

Republicans Like Scott Walker Are Building Campaigns Around Problems That Don’t Exist

Why Greenland’s “Dark Snow” Should Worry You

If You’re Outraged by the NFL, Follow This Satirical Blowhard on Twitter

The Best Way to Organize Your Fridge

The World

Iran and the U.S. Are Allies

They just aren’t ready to admit it yet.

Sports Nut

Giving Up on Goodell

How the NFL lost the trust of its most loyal reporters.

Chief Justice John Roberts Says $1,000 Can’t Buy Influence in Congress. Looks Like He’s Wrong.

How Steven Moffat Made the Best Doctor Who Episode in Years

  News & Politics
Sept. 16 2014 2:11 PM Spare the Rod What Charles Barkley gets wrong about corporal punishment and black culture.
Business Insider
Sept. 16 2014 1:23 PM Germany Has Asked Google to Reveal Its Search Algorithm, but That's Not Going to Happen
The Eye
Sept. 16 2014 12:20 PM These Outdoor Cat Shelters Have More Style Than the Average Home
  Double X
The XX Factor
Sept. 15 2014 3:31 PM My Year As an Abortion Doula
  Slate Plus
Slate Plus Video
Sept. 16 2014 2:06 PM A Farewell From Emily Bazelon The former senior editor talks about her very first Slate pitch and says goodbye to the magazine.
Brow Beat
Sept. 16 2014 1:27 PM The Veronica Mars Spinoff Is Just Amusing Enough to Keep Me Watching
Future Tense
Sept. 16 2014 1:48 PM Why We Need a Federal Robotics Commission
  Health & Science
Sept. 16 2014 1:39 PM The Case of the Missing Cerebellum How did a Chinese woman live 24 years missing part of her brain?
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.