How the mighty has fallen – or at least received its comeuppance.
By now, you will have heard of this public relations and legal disaster, also known as the Facebook IPO.
The great gatherer of personal information and annoying games (which thankfully no longer remind me of how “friends” are succeeding on their vegetable crops) decided enough money was not being made from advertisers, so why not make more money from a share offering.
The feeding frenzy that followed reminded me of piranhas in South America devouring some poor animal that had wandered too far into the river. It also reminded me of the price once garnered for tulips in the Netherlands, where for a time they were worth more than gold. Remember cabbage patch dolls? There is a theme here – demand outweighing supply, desire outweighing common sense and instinct.
But there were warnings in advance regarding the IPO. Even the Toronto Star (not known as the first-stop for financial news) was putting out articles from financial experts who were advising against purchasing on the opening day of trading. We now discover that select investors were warned in advance of revenue issues that resulted in the stock valuation being too high, yet the IPO was not delayed and that information was not (allegedly) properly disseminated.
Should it have come as a surprise that those not in the know (or who did not do their due diligence) are now alleging fraud and that class action lawsuits are in the works? No.
This mess could have been avoided with a little common sense (and input from some good lawyers ). Which begs the question, why didn’t Facebook call on us for some advice? The response from our corporate and litigation gurus would have been simple: disclose or delay.
Paul H. Voorn, Associate
Andriessen & Associates, Prof. Corp.