Reverse mergers and Dutch auctions don’t seem to be impressing Mark Zuckerberg. According to CNBC, the Facebook CEO has been on the receiving end of some ‘unconventional strategies’ pitched by investment bankers, but he is ‘leaning towards a more traditional and conservative approach’.
Creating a bespoke retail market via Facebook’s 800 million-plus users is one potentially lucrative option for bankers, and more than one bank has been poring over ways Facebook could leverage that community as part of an offering. Facebook management has rebuffed those suggestions numerous times, according to people familiar with the company’s thinking, maintaining that forcing the offering on its user base would be largely inappropriate — not to mention overly risky.
In my mind, Facebook is smart to play it straight on this one. The company is going to need some solid institutional investors if it’s going to raise $10 bn at a $100 bn valuation, and staying away from the funky stuff will make it a bit easier to pitch. Direct-to-investor stock sales, even via Facebook, do have a future, but trying to implement it at the IPO level would be incredibly risky … to the point of insanity.
Needless to say, the notion of going straight to investors must be tempting. The company has a user base of more than 800 mn, and it could be useful for later stock sales to grow its shareholder base. Even though Facebook is looking at a traditional IPO, CNBC notes that ‘it is still considering ideas it has solicited from bankers that would incorporate some type of unique component as part of going public’. Both private placements and Dutch auctions have been discussed.
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Source: CNBC
Photo: Andrew Feinberg via Flickr