For High Tech Companies, Going Public Sucks
When Facebook goes public this year, it will raise at least $5 billion, making it the biggest Internet IPO the world has ever seen. The day it debuts on the stock exchange, Facebook will be worth more than General Motors, the New York Times Company, and Sprint Nextel combined.
Context & Ripple Effects
The road to this story runs through a year of buildup: Facebook set an IPO window between April and June back in November 2011, the January valuation debate framed the listing as the £64bn question of 2012, and Bloomberg called 2012 the biggest Internet IPO year since 1999. Today's Wired piece lands at the end of that runway with the deal terms effectively locked: a confirmed $5 billion raise that would make Facebook, at debut, more valuable than General Motors, the New York Times Company, and Sprint Nextel combined.
What makes the piece travel is its contrarian framing — that the listing itself is a burden for high-growth tech companies rather than a triumph. That reading clearly resonated: eight outlets picked up the same-day coverage, with the Wall Street Journal's angle zeroing in on Mark Zuckerberg skipping the pre-IPO analyst meeting, and reports circulating (unconfirmed) that underwriters are being paid a historically thin 1.1 percent fee.
First-order effects
- Facebook absorbs full public-company obligations — quarterly disclosure, analyst coverage, shareholder pressure — while Zuckerberg's refusal to court analysts before the float signals management intends to keep operating on its own timetable.
- Underwriters on the deal are reportedly accepting a rumored 1.1 percent fee, far below standard rates, trading economics for placement on the largest Internet IPO ever.
Second-order effects
- Late-stage private companies weighing a listing see Facebook's terms — founder control preserved, banks competing for the mandate, no need to maximize proceeds — as a template for dictating IPO conditions rather than accepting them.
- Rivals and would-be filers in the 2012 pipeline face a bar-raising event: with Bloomberg already calling this the biggest IPO year since 1999, Facebook's mega-float will crowd out attention, banker bandwidth, and investor appetite for smaller tech offerings.
Third-order effects
- If founders conclude that going public costs control without being necessary for capital, the structural endpoint is tech companies staying private longer, concentrating ownership gains among private investors while public markets get access mainly to mature mega-listings.
- A pattern of founder-dictated IPO terms — minimal fees, absent roadshows, dual-class control — points toward a renegotiation of the implicit bargain between Silicon Valley issuers and Wall Street underwriters and regulators.
The trend: High-value tech companies are treating the IPO less as a milestone than a tax, using scarcity of their own equity to dictate terms to underwriters and delay or dilute public-market accountability.