Wednesday, 14 December 2011
‘Mark Zuckerberg should unfriend Wall Street’ æ
Francesco Guerrera, for the Wall Street Journal:
Mr. Zuckerberg’s has two options: a traditional IPO, in which banks distribute shares to investors in exchange for a percentage of total proceeds; and the little-used “Dutch auction” that cuts out the Wall Street middlemen by making the allocation of shares dependent on prices bid by each investor.
The biggest difference between the two systems, apart from the lower fees paid by companies in auctions, is that when IPOs go Dutch, banks don’t choose who gets shares, giving all investors a fair shake and avoiding potential conflicts of interests.
Google went Dutch. It didn’t go well for them, supposedly due to a deteriorating market, a poor “roadshow” and a Playboy interview. Facebook may face similar problems given the global economy and various privacy issues and lawsuits. But wouldn’t it be appropriately symbolic if Facebook had a successful IPO without the Wall Street middlemen?