How Goldman Sachs Blew The Facebook IPO
IPOs are wildly profitable deals for Wall Street investment banks, and they come with huge bragging rights. — So it's no surprise that the biggest Wall Street banks fought over the Facebook IPO for years. — The inside story of the Facebook …
Context & Ripple Effects
Back in January 2011, Goldman was flooded with Facebook orders when it marketed private shares to wealthy clients — evidence of how badly Wall Street wanted in on the company. The banks fought over the IPO mandate for years because IPOs carry fat fees and even fatter bragging rights, and Business Insider's inside account now reports Goldman botched its handling of the deal it most wanted.
The timing is brutal: Mark Zuckerberg kicked off the roadshow in New York on May 7 drawing hundreds of investors, and Facebook's amended S-1 has just admitted the web-to-mobile user shift is hurting its advertising business. The story's same-day spread — Bloomberg, CNET, CNN, Computerworld and others all picked it up, with Bloomberg zeroing in on one analyst calling Zuckerberg's hoodie 'a mark of immaturity' — shows how much appetite there is for a dysfunction narrative heading into pricing.
First-order effects
- Goldman takes a direct hit to its standing in the tech IPO franchise it spent years chasing, ceding the marquee mandate and its bragging rights to the rival banks that ended up leading the deal.
- Facebook's bankers must manage the roadshow while investors digest two negative threads at once: the inside account of deal mishandling and the S-1's new mobile-revenue warning.
Second-order effects
- Rival bulge-bracket banks that won Facebook roles gain a marketing asset for the next wave of mega tech IPOs, where founders choosing bankers will weigh execution track records alongside brand names.
- A bungled pricing or allocation process would hand ammunition to critics already questioning whether the offering is being run for insiders rather than public-market buyers, sharpening scrutiny of every roadshow disclosure.
Third-order effects
- If the pattern holds, mega-IPO mandate allocation shifts toward demonstrated execution over relationships, and founder-controlled companies treat banker selection as a strategic decision on par with pricing itself.
- Wide-spread inside accounts of deal dysfunction feed the case for tighter scrutiny of how hot tech offerings are marketed and allocated ahead of their debuts.
The trend: Mega tech IPOs are turning into reputational battlegrounds where a bank's execution missteps, not just its brand, decide which franchises win the next generation of founder-led listings.