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Why Facebook IPO Will "Shame" Markets

  • Reuters, Tuesday, January 31, 2012 11:54 AM

The speculation and predictions continue in anticipation of Facebook’s imminent stock sale. Writing in Reuters, Rob Cox reasons that the IPO will put public markets -- and, consequently, social media supporters -- “to shame.” According to Cox: “Investors will surely clamor for a piece of the social network.” Yet, “Unlike Google’s 2004 initial public offering, everyone who’s anyone has already made a killing off Mark Zuckerberg’s dorm-room project. At a $100 billion valuation, it’s hard to imagine much could remain.”

Giving elite investors -- from Sean Parker and Zynga’s Mark Pincus to Goldman Sachs and Microsoft -- early access isn’t all bad, Cox concedes. On the bright side, “it suggests innovative entrepreneurs can access ample capital from a diversity of sources,” he writes. “And that may mean fewer of the likes of [i.e., bombs] tap public investors.”

Still, “when the question of equality of opportunity in capitalism is being questioned like never before, Facebook shows one clear way the rich get richer.” The worry, as Cox explains, is that after the investing aristocracy has feasted on Facebook, there’s little left for the hoi polloi. “Google’s lifespan as a private firm was shorter before debuting at $85 a share,” he adds. “They’re now $580 -- a valuation approaching $200 billion. For Facebook to match that performance it would need to become the world’s first $700 billion company.”






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