Margaret Thatcher, Columbia Pictures, Mark Zuckerberg, and Groupon have what in common?
They all have a relationship to the wacky world of Initial Public Offerings
All systems are in high alert as lawyers, financial advisors, underwriters regulators and sellers convene. A strike price is the finale, followed by an official closing and celebration.
Many are the stuff of legend. In the 1970s and 1980s the Conservative Government in the United Kingdom privatized publicly owned corporations including British Gas. This issue was the hottest game in town. The organizing and marketing syndicate was well organized and global. It was a bought deal, buyers were on allocation and pound signs were in everyone’s eyes. Alas the market crash of 1987 left much of the shares in the banker’s inventory. Save us they cried to which Margaret Thatcher replied, save yourselves.
Now we have Groupon and Facebook; both examples of financings gone terribly wrong. Facebook is a dazzling display of chicanery.
This social network star was aligned with the IPO gods from the beginning. Millions of friends and a hit movie provided an international persona. No amount of marketing money could have duplicated the exposure. A continuous stream of a public issue announcements, years in advance whetted appetites further. No wonder the launch garnered so much enthusiasm. We know by now the results fell far short of expectations. Contrived? Unlikely, but certainly a rare combination of greed, manipulation and favorable circumstances for Facebook’s treasury.
British Gas, Groupon and Facebook are three new stock issues that failed. In contrast billions of dollars and hundreds of transactions are successful every year. The capital markets do work most of the time. If the story is too good to be true it often is not. Buyers beware.