More than three months after Facebook's IPO, chief financial officer David Ebersman is getting the blame for the social network's failure on the stock market, at least that's how DealBook's Andrew Ross Sorkin sees it. "It is David Ebersman’s fault. There is just no way around it," he begins his column. Many have piled on Sorkin for putting this all one one guy. "Is it just me, or is blaming Facebook's IPO Debacle on a single individual slightly myopic?" tweeted Jeremiah Owyang, an analyst for the Altimeter Group, for example. And that would be unreasonable -- in any other situation. From what we read following the public offering, however, Ebersman had an unusual amount of power in the deal. And from the sounds of it, the unilateral decisions he made resulted in too many shares of the stock flooding the market at too high a price. So, if we're going to pick a face of failure, the one under Ebersman's short-clipped, curly coiffe is the one.
There are three moments that make Ebersman the evil overlord in this Facebook deal, per Sorkin.
- "He signed off on the ever-increasing offer price, which ended up at $38 after the company had originally planned a price range of $29 to $34," he writes. As we now know that number was way overpriced, since the stock has since lost around 50 percent of its value, currently trading at around $18 per share.
- "He — almost alone — pushed to flood the market with 25 percent more shares than originally planned in the final days before the offering," other than the high price, investors have complained that oversupply and low demand led to Facebook's thud.
- "Mr. Ebersman was intent on making sure Facebook didn’t 'leave money on the table,' according to several people close to him," meaning he didn't want the stock to pop too much, which led the bankers to take advantage of him. "He was aided by errant advice from a cadre of banking advisers, who all had an incentive to sell as many shares as possible at the highest price possible," continues Sorkin. Facebook's stock popped for about one second, and then settled back to its original price, which at the time looked like a failure.
Some don't want to be so harsh on Ebersman, as these things were more situational, then the fault of a single man. "It's hard to remember, but on May 17, lots of people thought Facebook was on its way to becoming a $200 billion company in a matter of months, weeks, days, or even hours," Business Insider's Nicholas Carlson reminds us.
But, all along sources have said that Ebersman had unusual power and without others to push him one way or another, he did things his way. "Interviews with more than a dozen people involved in the IPO reveal that Facebook approached its deal differently than companies typically do," wrote The Wall Street Journal's Shayndi Raice, Anupreeta Das, and Gina Chon back in May. He was more than the "main point person," as DealBook's Evelyn M. Rusli put it in July, he went solo without input from CEO Mark Zuckerberg or COO Sheryl Sandberg. "Mr. Ebersman kept a close grip on every important decision on the stock offering, not deferring to his bankers the way many companies do, according to the people familiar with planning," continue Raice, Das and Chon. Zuckerberg delegated that role to Ebersman, sources told WSJ. And, Sandberg removed herself from the situation because of conflicts of interest with the Morgan Stanley people. "This IPO was an Ebersman and Grimes show," a source told Raice, Das and Chon, referring to Morgan Stanley's Michael Grimes. "They were joined at the hip."
It was that autonomy from Facebook and connection to Morgan Stanley that led Ebersman to make decisions that benefits the underwriters more than the company itself. Another source told WSJ that it was a "David decision" having more early shareholders cash out their stocks for the IPO. These "David decisions" were heavily influenced by Morgan Stanley more than other banks, said these same sources. And, if we look at the IPO from their perspective, it wasn't much of a debacle. The investment bank made a profit that The Wall Street Journal's Lynn Cowan calls "larger than normal" because of the way it was structured. Another WSJ report has the profit at $100 million for Wall Street, Morgan Stanley included. Yes, other people work at Facebook who have power. And maybe we should blame Zuckerberg, as some have, for not being CEO enough to handle the event. But, perhaps if others with Facebook interests in mind had been involved to the extent that Ebersole had, Facebook wouldn't have embarrassed itself at the expense of the bankers.
If we knew all of this already, though, why does Sorkin to tell us this now, so many months after the debacle, wonders AllThingsD's Kara Swisher in a tweet. Facebook's stock continues to fall, but that no longer has to do with the IPO, argues Business Insider's Jay Yarow. Sorkin disagrees, suggesting Facebook's situation how has a lot to do with the original pricing: "We have passed the pivotal three-month mark," he writes. "Statistically, the three-month mark is a much better predictor of a company’s future share price than any of the closing prices in the first week or two. According to Richard Peterson of Capital IQ, 67 percent of technology companies whose shares lagged their I.P.O. price after 90 days were still laggards after a year," he continues. Plus, we think it's all about perspective. If Facebook hadn't priced so high originally this would all look quite different for people who bought shares that first day and from the media's perspective. Pointing out that the stock has lost around 50 percent of its value since that IPO makes things sound dire. Sure, the value of what the company offers isn't Ebersman's fault. (It's trading at $18 today because it is worth that much.) But the overhype was his doing, or at least it could have been stopped by him.