DEAR FACEBOOK EMPLOYEES: Here's The Truth About Your Stock Price
Facebook's stock has dropped by half since the IPO three months ago. — And the stock price is now well below the level at which most employees have been granted stock in the past 18 months.
Context & Ripple Effects
The slide has been steady rather than sudden: shares dipped below $29 within weeks of the May IPO, erasing roughly $35 billion in value ($35B lost since the IPO), staged a brief 20% two-week rebound in June that bulls took for a floor, then kept falling until half the IPO value was gone by mid-August. Business Insider's open letter to staff lands one day after Zuckerberg conceded at a company-wide meeting that watching the chart was 'painful' — management is now openly managing morale, not just the product.
The pickup shows how far this has travelled past the tech press: the same day's coverage runs in the Wall Street Journal, Los Angeles Times, Mashable, Yahoo Finance and NBC Bay Area. The under-water-grants point is the sharpest angle because it converts an investor story into an employee story — and it sits against confirmed operational bright spots (Facebook passed Yahoo in July to become the No. 2 U.S. video site per comScore, and is building the Sub-Zero storage facility beside Prineville) plus overhangs including the rejected Sponsored Stories settlement and reports of bankers splitting $100 million shorting the stock.
First-order effects
- Employees granted stock over the past 18 months are now holding equity worth well below their grant price, cutting the real value of their compensation packages roughly in half overnight.
- Zuckerberg is forced into visible damage control — the company-wide 'painful' admission shows leadership addressing retention anxiety directly rather than letting it fester.
Second-order effects
- Rival employers gain a recruiting window: offers weighted toward cash or freshly priced equity beat Facebook paper that is underwater, pushing Facebook toward repricing or refresh grants that would dilute existing holders.
- Institutional skepticism is being monetized against the company — reported banker profits from shorting the stock add a Wall Street constituency invested in continued weakness, while the unresolved Sponsored Stories litigation keeps the ad business under legal cloud.
Third-order effects
- If the pattern holds, the IPO marks the moment public-market pricing discipline caught up with a company valued on private-market terms — forcing consumer-internet firms to justify valuations with revenue growth rather than user counts alone.
- Equity-heavy startup compensation loses its reliability as a retention tool when post-IPO prices sit below grant levels for months, pushing the industry toward longer vesting structures or cash-weighted packages.
The trend: The Facebook IPO is becoming the defining test case for whether consumer-internet companies priced on private-market optimism can retain talent and strategic patience once public markets reprice them.