Facebook’s imminent stock sale risks putting public stock
markets to shame. Investors will surely clamor for a piece of the social
network. But unlike Google’s 2004 initial public offering, everyone who’s
anyone has already made a killing off Mark Zuckerberg’s dorm-room project. At a
$100bn valuation, it’s hard to imagine much could remain.
The list of who gained access to Facebook’s value-creation
steamroller is extensive. It’s not just Silicon Valley elite, including Sean
Parker, Peter Thiel and Zynga’s Mark Pincus. The roster extends to global
billionaires and, naturally, Goldman Sachs. Even Microsoft is up big.
In one respect, that’s good. It suggests innovative
entrepreneurs can access ample capital from a diversity of sources. And that
may mean fewer of the likes of Pets.com tap public investors. But when the
question of equality of opportunity in capitalism is being questioned like
never before, Facebook shows one clear way the rich get richer.
Set aside the earliest funders. Thiel, who invested the year
Google went public, gambled on a Harvard dropout with an idea. Accel Partners
could easily have seen its $12.7m investment in 2005 vanish, rather than rise
to $9bn on paper.
Later investors also took risks, though their procession
looks more like the Davos caste system. At the $15bn mark, there was Microsoft
and Hong Kong billionaire Li Ka-shing.
Soon after, Russian internet smarty-pants Yuri Milner
cleverly offered to buy stock from Facebook employees. Bono’s Elevation
Partners swooped in with a deal that might just allow it to raise another fund.
Later came Goldman, buying nearly $2bn of Facebook stock for
private banking clients and itself at a $50 billion valuation. Facebook staff
shares were available on SecondMarket, but only to accredited investors with
experience investing in private firms.
The worry is that after the investing aristocracy has
feasted on Facebook, there’s little left for the hoi polloi. Google’s lifespan
as a private firm was shorter before debuting at $85 a share. They’re now $580
– a valuation approaching $200bn. For Facebook to match that performance it
would need to become the world’s first $700bn company.
(Rob Cox is a Reuters
Breakingviews columnist. The opinions expressed are his own)