An anti-Wall Street idea that I like

As someone who believes in competition and challenges to the entrenched ways of doing things, I think this is a great idea (from the Wall Street Journal):

By virtue of its size, business model and popularity, Facebook is the rare company that doesn’t need Wall Street to go public. It should press home the advantage and blaze a trail for others to follow.

Mr. Zuckerberg’s has two options: a traditional [initial public offering], in which banks distribute shares to investors in exchange for a percentage of total proceeds; and the little-used “Dutch auction” that cuts out the Wall Street middlemen by making the allocation of shares dependent on prices bid by each investor.

The biggest difference between the two systems, apart from the lower fees paid by companies in auctions, is that when IPOs go Dutch, banks don’t choose who gets shares, giving all investors a fair shake and avoiding potential conflicts of interests.

This is particularly important for “hot” IPOs, like Facebook. Since these deals often record sharp rises in the first days of trading, there is a temptation for banks to dole out shares to their favorite investor clients, who stand to profit if they get in early.

Wall Street’s penchant for being both poacher and gamekeeper has left banks with conflicted loyalties; they take companies public while at the same time trying to keep hedge funds and other high-paying customers satisfied.

Granted, Sarbanes-Oxley has led to Wall Street’s losing IPO business to exchanges in other countries. So, Wall Street already faces more competition in this area. And deep, liquid equity markets remain vital to a (mostly) capitalist system. So, it should go without saying we don’t want to shut down the Street.

But put a little pressure on the banks? The real kind of pressure that comes from declining to play by their rules (thus denying one of them a big payday), not the fake kind of pressure regulators exert via rules that are eventually skirted, if not co-opted from the beginning to favor certain players?

Have at it, Mr. Zuckerberg.

P.S. — And then, if it goes well and you really want to mess with the banks, why not explore whether a certain social-networking giant with world-wide reach could get into the IPO business itself?

– By Kyle Wingfield

Find me on Facebook or follow me on Twitter

31 comments Add your comment

td

December 13th, 2011
3:54 pm

td

December 13th, 2011
3:57 pm

My question is why go public at all if you know you are going to make a ton of money anyway.

carlosgvv

December 13th, 2011
4:17 pm

If any of you honestly believe The Wall Street Journal would print a story that is actually anti-Wall Street, I have some good oil well stocks for sale.

Kyle Wingfield

December 13th, 2011
4:20 pm

carlosgvv: You obviously do not read the WSJ.

Hillbilly D

December 13th, 2011
4:26 pm

My question is why go public at all if you know you are going to make a ton of money anyway.

Perhaps, they believe that Facebook’s success will be co-opted by something else in 2-3 years (remember MySpace?) and they’re trying to cash out now.

Lee Weber

December 13th, 2011
4:33 pm

Had a long talk a while back with a very savvy businessman and investor about this issue. We agreed that the Street is now little more than Vegas East. Brokerage houses and banks aren’t either anymore…they’re bookies. By and large, companies don’t go to Wall Street to raise capital anymore and I hope Facebook doesn’t either.

td

December 13th, 2011
5:13 pm

Hillbilly D

December 13th, 2011
4:26 pm
My question is why go public at all if you know you are going to make a ton of money anyway.

Perhaps, they believe that Facebook’s success will be co-opted by something else in 2-3 years (remember MySpace?) and they’re trying to cash out now.

Good response.

Lil' Barry Bailout (Revised Downward)

December 13th, 2011
5:14 pm

Facebook wants to go public so the small number of folks who hold their shares have some way to diversify their investments or cash out some or all of their holdings. Until a company goes public, they’re only allowed a small number of shareholders, so the list of potential buyers is short. Going public creates a broader market.

Jefferson

December 13th, 2011
5:40 pm

Public companies should be regulated.

get out much?

December 13th, 2011
5:42 pm

I wonder how much Goldman Sachs expects to profit off of this arrangement. If you recall, Facebook cut a little deal with them a year ago for $500 million.

Lil' Barry Bailout (Revised Downward)

December 13th, 2011
5:44 pm

Name one public company that isn’t regulated.

I Report (-: You Whine )-: Thee Magnificent!!! mmm, mmmm, mmmmm! Just sayin...

December 13th, 2011
5:59 pm

Why don’t the big business conglomerates just buy a newspaper? Then they can publish whatever goony lib propaganda and dummycrat lie they damn well feel like.

Oh wait, they already have.

Never mind.

Logical Dude

December 13th, 2011
6:00 pm

Quoth: why not explore whether a certain social-networking giant with world-wide reach could get into the IPO business itself

Now that’s interesting. . . taking a virtual company and having it move into virtual money game?

Yep, virtual money. . . that’s all that the electronic money is anyway. So I think it fits right in.

carlosgvv

December 13th, 2011
6:00 pm

Kyle, I did read it. I just don’t believe it. You don’t bite the hand that feeds you. This Wall Street article is nothing more than smoke and mirrors.

[...] Street JournalFacebook planning to launch mobile adsFinancial PostSan Francisco Chronicle -Atlanta Journal Constitution (blog)all 16 news [...]

I Report (-: You Whine )-: Thee Magnificent!!! mmm, mmmm, mmmmm! Just sayin...

December 13th, 2011
6:08 pm

For instance, The Washington Post is owned by an educational institution, one in which students don’t graduate and default on their student loans.

To maintain it’s “status” as a “moderate” publication, it spins off hacks like Politico and goons like Slate through which it can spew vile liberal ignorance whenever it gets the urge.

And, of course, they want everyone else to stfu.

Brian

December 13th, 2011
7:08 pm

Most of y’all don’t even understand what Facebook is and where it’s intrinsic value is. Comments like the one about MySpace reflect an abject lack of knowledge of the social DNA altogether.

Dinkdunk

December 13th, 2011
7:44 pm

What? And cut and Mr. And Mrs. Pelosi? What a laugh.

michele

December 13th, 2011
8:17 pm

The banks are being run by modern day pirates. Evil and greed and sloth and envy and coveting and naked people everywhere you look.

I wonder how much they’re paying tellers these daze….

I Report (-: You Whine )-: Thee Magnificent!!! mmm, mmmm, mmmmm! Just sayin...

December 13th, 2011
8:29 pm

Notice how al-Gore adopts each new passing fancy as his very own doomsday rocket ride-

The disruptive threats now facing the planet are extraordinary: climate change, water scarcity, poverty, disease, growing income inequality, urbanization, massive economic volatility and more. Businesses cannot be asked to do the job of governments, but companies and investors will ultimately mobilize most of the capital needed to overcome the unprecedented challenges we now face.

But always looks to you to fund his lavish lifestyle.

If you’ll just be scare mongered enough to.

morons, just sayin….

DLink

December 13th, 2011
8:36 pm

http://www.dol.gov/whd/minwage/america.htm#Georgia

Start with getting GA out of the 5 state backwater hole. Wait, I think I just saw Jesus in the back yard firepit… No, just Newt and Mitt dancing with each other. Creepy.

Keep in mind, child, take money, or anything for that matter from a corporation, and they’ll take it back somewhere else, if only for the paycheck. And the numbers go up at the top, they go down at the bottom. That’s what we see right now. That’s the way the system is currently working. CLOSE ALL THE LOOPHOLES. It’s the only way to be sure.

Firewall the money the way companies firewall the workers time and effort. Don’t let loopholes cheat the tax system. Capital gains are INCOME. Money off my back. My work. Sure, it’s an investment, on the work my back has put into it and been taxed at double the rate. Let’s think about what that investment was… the money made off others work. INCOME. I’ve been writing for 15 minutes, statistically speaking, someone has successfully committed suicide in the U.S. while I’ve been writing this. Just something to think about.

JDW

December 13th, 2011
9:18 pm

@Kyle, Facebook is one of the very few companies that could get away with a “Dutch Auction” IPO. Everything you say about banks and doling IPO stock out to customers is true (BTW that extends to the first couple of trades in many cases), but the part you left out is that Facebook will require Marketmakers after the IPO. They might be hot enough to get them without paying the conventional fees and some might come anyway but my guess is that MZ doesn’t take the risk.

Fred

December 13th, 2011
9:20 pm

get out much?

December 13th, 2011
5:42 pm

I wonder how much Goldman Sachs expects to profit off of this arrangement. If you recall, Facebook cut a little deal with them a year ago for $500 million.
++++++++++++++++++++++++++++++++

You ARE talking about the Goldman Sachs that precipitated our whole economic meltdown , got bailed out by taxpayers and profited greatly from it right? you can believe that those rat bastiches will make a ton of money. And if they don’t they pay congress enough to ensure hat they will anyway.

Free trade my ass.

DLink

December 13th, 2011
9:26 pm

Whiner…

I don’t think I’ll do this again… Look at Atlanta from the 45 floor of an open building and see the smog I was warned by my brother about. It’s visible and has crosshairs on Atlanta. 285, 85,20. Overseas I regularly saw people in surgical masks…. Paranoia – or common sense?

Take a look out of that first class, or other, window sometime when flying. It’s simple, it’s straightforward, and we’re getting screwed – and the government is all too geared to help us there. I’m willing to fire them all… But, forget the newt, mitt thing. Bush got 8 of big spending, I expect republicons to go for the next money term when Obama takes some back. Not this one. There’s no MONEY in it.

I’d vote wildcard Left if a rabid anti-repbulican stepped in with the right ideas. Not RIGHT, right, there’s a difference. Republicons are like a vampire sucking more life out than they need, and it’s become a F’g problem. Surgical masks are sold by the crate in China, to family’s. Not businesses. To walk down the street in Beijing. Big businesses won’t pay for a surgical mask for the crap they churned out, And yes, we benefit from those low prices. Wait, 1% of us benefit a whole lot.

Putting on my surgical mask everyday for work… many countries do exactly that, I’ve seen it. It can be prevented.

http://www.wired.com/magazine/2009/12/ff_new_nukes/all/1

Just something to think about.

Screech + Erkel = Obama

December 13th, 2011
9:33 pm

“Dude, where’s my drone?”

President Nerdstrom

December 13th, 2011
9:36 pm

Dude, give me back my drone. Not cool bro!!!

DLink

December 13th, 2011
10:29 pm

Wake up and moderate the comment, would you? I know it’s fun to learn, it’s why I put it here.. But, I worked nights, 2′nd and 1’st (not at the same time) – and I’m tired. It’s like anything education just gets shot down. All back of the bus like… Toombs. I’m out, y’all have fun, now.

It’s only as serious as you make it. Life, that is.

ragnar danneskjold

December 13th, 2011
11:13 pm

Sadly the SEC would find some “deception” in such a fair auction, and issue massive fines against the insiders. Were we Hong Kong, there is no doubt that Facebook would hold its own Dutch Auction. Of course, there is nothing to prevent an international company like Facebook from issuing its IPO in Hong Kong, is there?

Lee Weber

December 14th, 2011
12:02 am

Just to reinforce my “Vegas East” comment, I was watching an old “60 Minutes” on CNBC …profiles on Ted Turner, Larry Ellison, and T. Boone Pickens. Good profile journalism and fine work.

I ended up getting absorbed doing other things. When it ended, “Mad Money with Jim Cramer” came on. Watched Cramer break down his advice on an oil stock indicator.

It had zero to do with business. Mainly resembled the breakdown on ESPN of a pro football game, complete with diagrams, game plans, predictions on the other teams tactics, etc.

I used to bet on sports. I know whereof I write….this ain’t investing…it’s gambling.

ODD OWL

December 14th, 2011
1:00 am

Wall Street and the greedy banks have become a giant ponzi scheme….

[...] Dive Head First Into Mobile Ads Just Ahead Of Its IPOSan Francisco ChronicleWashington Post -Atlanta Journal Constitution (blog) -BusinessWeekall 20 news articles » [...]