As you will certainly not have failed to notice, Facebook’s IPO didn’t go as planned.
Here’s an executive summary:
- It was the highest-priced tech IPO of all time
- The stock rose for a few hours on the first day of trading, then turned tail
- On the second and third days, the stock tanked – although it has subsequently started to rally
- The early result is that Facebook’s corporate reputation has suffered some damage
Facebook’s sudden stock price plunge made it twice in a week that we’ve witnessed widespread public shock and indignation: just how could this have happened? Why didn’t the stock “pop” and provide easy, free money for IPO investors? (The other time, of course, being the aftermath of Bayern München spectacularly losing the Champions League final. At home. Against Chelsea, a team they’d dominated for 75 of the regular 90 minutes. But that’s another story).
Back to Facebook. Enough has already been written about how and why the stock tanked. The story is already turning from reportage to analysis, for example, Business Insider has the “inside story”. We’ve seen schadenfreude from those who didn’t buy-in, and a combination of bravado, hand-wringing and now lawsuits from those who took a punt.
The massively high P:E ratio on tech stocks like FB:US or Groupon is part of the reason they can fall so heavily. Inflated prices are pumped up by those who don’t want or care to remember the tech bubble of 2000 – and the years (at best) afterwards that many “bubble” stocks spent underwater.
On the PR front, Facebook is facing the perfect storm. From today’s position, it doesn’t matter whether the stock price continues to slide, stabilizes a few bucks below IPO price, or shoots into the stratosphere. Because they’re damned if they do, and damned if they don’t.
From a PR perspective, there’s no easy way out. Here’s a recap of the limited options – and why each one is a bad PR move:
- Blame fickle traders and “the market”. Why it is a bad move: PR basics apply – you never blame your customers. Or anyone. Instead, you focus on the positives … maybe tough here. Perhaps highlight how Zuck’s wallet is 10% lighter?
- Blame an executive internally. Media reports are already piling the pressure on. But having to fire a C-level executive for bungling the IPO will hardly help the confidence of Wall St investors…
- Blame the media for over-hyping the IPO. Except that the media didn’t set the price for the initial stock offering. Next try…
- Explain away the drop by the sheer volume of staffers cashing in on their pre-IPO options. Er no. Again it’s a case of PR principles: Never cast blame unless you can prove beyond reasonable doubt that the actions were of a rogue employee with their own twisted agenda. Next …
- Blame the bankers. Yawn…
- Blame computer glitches for affecting trading in the first week. Come on, who are you kidding?
Really, the only option that Facebook has to come out of this smelling of roses is to wait/pray for the stock to shoot up and then try to explain away the madness of the first days as “pent-up demand” or “the stock establishing its true value in a turbulent market”.
Even then, there’s a rather big black PR cloud on the horizon for Facebook: As a colleague put it very succinctly earlier, Facebook’s next problem will be coping with the massive brain drain of overnight millionaire employees, who now have the liquidity to part company with what was once the coolest company in the Valley.