The search for a scapegoat in the Facebook IPO controversy shifted focus this week away from CEO Mark Zuckerberg to Chief Financial Officer David Ebersman, the man hired to navigate the social media company's journey to become a public company.
Ebersman has certainly received his share of criticism in the months since Facebook's stock debuted, and then deflated. But the true campaign to oust him officially began last weekend with a blistering column in The New York Times by their famed deals reporter Andrew Ross Sorkin with the headline, "The Man Behind Facebook's I.P.O. Debacle."
"And yet if there is one single individual more responsible than any other for the staggering mispricing of Facebook's I.P.O., it is Mr. Ebersman," Sorkin wrote. "He signed off on the ever-increasing offer price, which ended up at $38 after the company had originally planned a price range of $29 to $34."
Ebersman's sins also included, according to Sorkin, pushing to increase the number of shares sold at the offering by 25 percent. And since then, Ebersman has failed to tell investors just how the company will boost a stock price that closed on Wednesday at $18.58 per share.
Tough stuff. But does the blame fall squarely on the shoulders of Ebersman?
Nope, not by a long shot.
There's plenty of blame to go around here. Certainly, Facebook executives, including Ebersman, miscalculated the market value of Facebook stock. And of course Nasdaq's trading system failed that day, creating a negative vibe around the stock right out of the chute.
But Sorkin would have us believe that Ebersman is the main villain, and thus, the leading candidate to see his head roll in retribution.
There are a couple things that are odd about that view.
First, there's a reasonable argument to be made, as many have, that Ebersman did everything right. His job was to raise the most money possible for his company. Indeed, Facebook raised $10 billion to put in its war chest for a rainy day.
Mark Cuban, the entrepreneur turned NBA franchise owner turned blogger, made this point in a post responding to Sorkin.
"If the goal of the company is to maximize the cash obtained from the IPO, then the CFO should absolutely price the stock to maximize the return," Cuban wrote. "If the goal of the company is to get a 1 day pop to make a PR splash, that is a completely different strategy. It obviously was not the strategy of Facebook."
But the oddest thing about Sorkin's take is how it all but absolves Wall Street bankers for their part in this drama. It makes them almost seem like bit players in the Facebook IPO controversy, small men pushed around by big, bad Ebersman.
Which, of course, is nonsense.
It was the job of bankers to gather data on how the market valued Facebook, how much people would pay for the stock, and how to set the price. Ebersman could not make unilateral demands to raise the price or shares. They had to be telling him that yes, their clients would buy, that demand was there.
Of course, that turned out to be wrong information. Instead, the banks who underwrote the IPO spent the first day buying back shares to avoid the embarrassment of the stock closing below the offering price.
On top of that, they convinced a lot of high-rolling clients to buy pre-IPO stock at $38 per share, likely thinking that this would lead to a nice little windfall when they flipped the stock after a couple of days.
Instead, those clients are now deep underwater, and making angry calls to brokers, who are in turn sending angry emails to their investment banking colleagues, all wondering: How are you going to get the stock price back up?
And that's the problem. Zuckerberg and Facebook were very clear in their IPO filings that they would not manage the company for short-term gains, or do things just to boost the stock price. They have their sights set on the long haul.
So what's a frustrated banker to do? Maybe start a whisper campaign trying to shift all the blame to a figure like Ebersman, maybe in the hopes of creating the lone bad guy whose firing or resignation might give a bump to the stock price, and get a few clients off their backs.
To that end, I'm sure a lot of bankers were high-fiving over Sorkin's story. It offers the narrative that bankers want us to buy.
But sacrificing Ebersman would be a big mistake for Facebook. It would be a panic move for Zuckerberg and the board, one that would betray their insistence that they would not be driven by the short-term thinking of Wall Street.
Now Facebook can show its mettle and make a big statement by tuning out the wailings of disgruntled investors who should have known the risks involved in such an investment.
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