The wonderful world of tech Initial Public Offerings isn’t the same beast that it was back in the hey days of the dot com boom. Gone are the days when caution was thrown to the wind on any company that managed to demonstrate a modicum of social proof, where the idea of going IPO was just a way to get another round of keeping a company going until they found a sustainable business model. Today whilst going IPO is still done with an eye to gather more funds for expansions they’re also big events for investment companies to make a quick buck on the hype surrounding a tech company going public. So much so that it’s become something of a trend for sexy high tech companies stock’s to soar on the first day only to come back down to reality not long after.
Take LinkedIn for example. On its opening day the share price skyrocketed, more than doubling its price on the opening day. Many took this as a sign that the tech bubble was returning with a vengeance, that tech companies would soon be inflating the market beyond its sustainable limits and that we were seeing the makings of another crash. More astute observers recognised that instead it was actually a ploy by the investment companies managing the IPO process. Instead of it being a sign that these tech companies were fuelling another bubble it was the investment companies severely under-pricing the IPO. Doing this would seem highly counter-intuitive, I mean who wouldn’t want the best debut price? The answer is of course, and unfortunately, very simple.
They wanted to be the ones who profited the most from the IPO.
Pricing the IPO so low meant that the initial buyers could acquire many more shares than they could if the IPO. Knowing that the stock was undervalued they then just had to wait for the pricing to hit it’s trading peak before unloading their shares on the market. Done at the peak of the LinkedIn IPO companies like Morgan Stanley, Bank of America Merrill Lynch and JPMorgan who were underwriters were able to get an easy 1X return without little to no risk. Employees and preferred stock holders who elected to have shares in the IPO got screwed of course, but that’s not a concern for these big name investment firms.
So it was with great anticipation that I watched the recent Facebook IPO. It’s by far the biggest tech IPO in history and also managed to set records in terms of trade volume on the first day. Since then it’s been a slow downhill trend for the nascent stock, shedding something like $11 per share since its high of around $42. Whilst the first day of trading was cause for concern, mostly because there wasn’t an insane pop like there was for all other tech stocks, the following days have been nothing short of astonishing at least for the investors who jumped in alongside everyone else on the first release shares. You’d think that this was a bad thing but for this aspiring start-uper it’s nothing short of glorious.
The other tech IPOs that showed explosive growth only did so because they were engineered that way. Now I have no idea why the Facebook IPO didn’t, it certainly had all the makings of one, but there’s a good chance that the watchful eye of the SEC had something to do with it. For all the people who bought in early they’re undeniably screwed but there is one group of people who (rightly so) profited from Facebook’s IPO: the people at the company.
The shares that made up the original offering would have come from preferred stock (early investors), common stock (employees) and options that other people had accured over Facebook’s 8 year lifespan.For them a right priced IPO that then declines in value means that they’ve got the maximum amount of value they could and were not screwed over by an artificially low stock price. Of course this has the not-so-nice aspect of pissing off a lot of investors, many of whom are now crying foul over the share price making a beeline for penny stock level. That’s warranted to some extent but you’ll forgive me if I don’t shed a tear for those companies who screwed over many a tech company in the past in the pursuit of a quick buck.
The question on everyone’s lips is where Facebook’s stock will go from here. Honestly I’m not sure, they’ve definitely struggling with mobile which is starting to heavily cut into their revenue and apparently the reason behind their Instagram acquisition but you’d figure that they’ve innovated heavily in the past so they should be able to turn it around in the not too distant future. Still all this negative press isn’t going to do the stock price any favours so unless the commentators want to see the price keep falling they should probably just shut their yaps and wait for the market to properly correct. The next few weeks will be very interesting times indeed and I can’t wait to see how the investor butthurt plays out.
I’ve been a keen user of social tools for a while now, over 4 years if memory serves me, and if I’m honest I’d have to say that whilst they’ve been extremely useful for my personal life they’ve really done nothing for me professionally. Sure Facebook and Twitter helped get this blog out of the doldrums of it seeing an average 1 page view a day (rocketing it to a whopping 10 per day, woo!) but apart from a single piece of software to review I haven’t really furthered my career or future prospects for wealth through using these channels. I could put that down to a major lack of trying however since my career has done pretty well without me having to rely on my social network.
I guess I’m just lucky that I’m in an industry that’s mostly meritocratic.
However recently I’ve started to get noticed by people who’ve found me through my social networking exploits, mostly through LinkedIn. Now the profile I have up there is pretty rudimentary with the only updates I’ve done to it over the past few years being to update my current job location and put a profile picture on there. Still the past 2 months has had me receive multiple phone calls, connection requests and emails all originating from LinkedIn. All of them are recruiters either eager to put me in a position they have or to build their social networks so they have a bigger candidate database, neither of which I’m particularly interested in at this current time.
You see whilst my profile might be public for everyone to see I’m not one of those people who makes connections on there for connections sake. It’s like any other social network to me, if I friend you on Facebook I consider you a friend, if I follow you on Twitter it means I’m interested in what you have to say. A connection on LinkedIn means I’ve worked with you in some capacity in the past or I see potential value in maintaining a business style relationship with you. An unsolicited request from a recruiter matches none of these rules and only serves to dilute the network of people that I’ve curated and only creates value for the recruiter. Sure its flattering that they consider me a valuable enough person on face value to want to connect with me but they’ve also done that with hundreds of other people so it means a lot less than they think it does.
For the most part though the requests are pretty harmless. I’ll get a single email asking to join my network and simply ignore it since I have no idea who they are and since I’m not currently in the market for a new job have no interest in establishing a relationship with them. However there was one persistent bugger who not only sent me multiple connection requests but also decided to email me several times and drudged up my phone number from an old resume he’d pilfered from a previous employer. I thought he would’ve got the hint after me not responding to him for 2 weeks but I guess I underestimated just how desperate some of these people can get.
You know how most of the recruiters I talk to got past the initial barrier? They offered to come see me in person and have a chat about what my needs might be. If you’re not willing to get past the barrier of doing a simple half hour meeting with me then I’m not going to be interested in giving you the recruiting bonuses and recurring commissions that one of my contracts will get you. Sure it’s a small thing but it shows me that you’re not just interested in fleshing out your candidate database and, more importantly, it gives me a chance to see if you’ll provide more value than just pimping me out to job agencies. Market knowledge is as important to me as is your ability to find jobs when I need them.
Could this all be solved by simply taking my LinkedIn profile Down? Sure, but since I’m a massive control freak I’d like the ability to have control over the presence I have on the web and with many people now googling potential employees that presence counts for a lot. I may have to deal with the odd obnoxious recruiter and may never realize any real value from it but I feel it’s still far better to have it than not. Well at least until this blog hits the number 1 spot in google for David Klemke, which it can’t be far off doing now.