Is Facebook Worth $100 Billion?

[MadImmortalMan]

or at least theoretically negotiate a compensation package that isn't stock based.

It took Microsoft's employees more than ten years of complaining to get them to balance in more cash and start paying a dividend.

[crazy canuck]

And because he still personally owns a controlling interest in Facebook he doesn't really need to care if the share price drops

I'd rather have a controlling interest in a company worth more than a company worth less.

Why?  It only matters to Zuckerberg what the share price is if he is trying to sell.

that may be precisely the problem.

[OttoVonBismarck]

There is good reason Zuckerberg doesn't care about the stock price, that money is basically fake money to him. On IPO day Zuckerberg sold enough shares at $38 or whatever stupid number the shares were trading at so that he'd basically have $5bn in actual cash. He basically is now permanently uber-rich no matter what.

He maintained enough shares in the company that he kept control, so he's got a pile of cash and still controls the company, why should he be obsessed with share price? The reality is lots of analysts have said for a long time the fair value of Facebook stock is like $18-19, and we're about there right now. I do not necessarily believe Zuckerberg should be stepping down simply because a tremendously over-inflated stock price has adjusted to a fair valuation. Zuckerberg benefited immensely from the overblown valuation, but he is not the one who made tons of investors buy in at that price and various other prices from $25-38 as the stock has gone down.

I believe a lot of long term employees who had stock options were made rich by IPO day, so I don't really know that he has done bad by long term employees, either. I mean keep in mind those stock options are in addition to the salary and benefits they received. Facebook hasn't been a fly-by-night internet startup in a long time, and in fact they are famous for "stealing" employees away from more established companies like Google by offering them better pay...so the guys working at Facebook were not underpaid techies who were promised big stock options to make it all right in the end.

Zuckerberg hasn't lied about Facebook's revenues or its profit, and he hasn't lied about the long term risks his company faces. It was all there in the prospectus, he's basically blameless in what has happened with the share price. Now, all that being said if Zuckerberg wants to keep Facebook profitable he needs to either cut costs or go balls out focusing on increasing revenue per user, because the history of their quarterly returns suggests if one of those things doesn't happen the business will become fiscally unsustainable.

[OttoVonBismarck]

Zuckerberg, the VCs, and long-term employees also were not the only ones who benefited from that IPO by the way. The company raised billions of capital which it can use for strategic purposes, it was a generally smart move and probably the best time to do it.

I believe the limit on shareholders in a private corporation before you have to essentially go public is 500, and I think Facebook has a corporate culture where they wanted to give more of the newer employees stock options and were unable to do that, and they were running up against that limit for things like attracting any outside capital.

If you want to keep it private you have to keep it very tightly held. The Mars company I believe 80-90% of their assets are controlled by 5 members of the Mars family (all multi-billionaires) with a small remainder owned by I believe the descendants of another candy-family that somehow ended up with a share.

Koch Industries is like 90% owned by the two most famous Koch brothers, that's basically the model to follow if you want to keep a big business private.

[CountDeMoney]

Meh, he's a borderline autistic script kiddie, not a CEO.  Investors knew that coming in.

Facebook took over from myspace and is the global leader in sharing embarrassing pictures and deploying "like" buttons. Someone was doing more than writing script to get facebook where it is.

Until the next fave-rave comes on the scene;  gambling on internet bullshit is about as wise as gambling on perishable produce.

[crazy canuck]

There is good reason Zuckerberg doesn't care about the stock price, that money is basically fake money to him. On IPO day Zuckerberg sold enough shares at $38 or whatever stupid number the shares were trading at so that he'd basically have $5bn in actual cash. He basically is now permanently uber-rich no matter what.

That is a good reason why Zuckerberg should not be the CEO.  Your argument boils down to "dont blame him for the share collapse.  He got his and now he doesnt care what happens to the share price."

Now that is prime CEO material right there. 

[DGuller]

I'm sure Zuckenberg is still bound by some laws.  In this country, you can't do whatever you want just because you own 50%+1 shares of the company.

[OttoVonBismarck]

No, my argument as to why Zuckerberg shouldn't personally care is because he's already cashed out. But you don't replace a CEO for no reason at all, can you point to anything Zuckerberg has done since the IPO that would justify his removal as CEO? (A moot point by the way, since he controls the board he cannot be removed against his will.)

The assumption is if the share price went down, the CEO has done something wrong?

That's stone cold retarded, and in general CEOs often have little control over share price. In some ways if I was an investor I'd prefer a CEO who isn't overly concerned with share price. There is an oft-repeated argument that because bonus schemes are tied to stock performance, CEOs will manipulate things to maximize the stock performance to the detriment of the overall company's long term competitive advantages. That argument isn't really that apt, if you actually look at CEO compensation plans at big companies they tend to be based on a nexus of performance metrics such as EPS, corporate free cash flow, total revenue etc...basically corporate boards aren't typically so stupid as to just base it on simple market price of the company's shares. So while the argument doesn't really apply to real world situations, it comes from the right place...namely that fluctuations in a company's share price can happen for any number of reasons. Many of them actually have little or nothing to do with that company individually, and for that reason it is foolhardy for an executive to obsess on them.

Profit is the lifeblood of a company, you need enough to remain a going concern, and then enough to maintain your business or grow your business against your competitors. If a CEO does boneheaded things, like make big bets on poorly designed new products (and for fun taking out lots of debt to finance it) and runs the company deep into the red that is time for action. If the CEO burns bridges with import supply chain partners, is allowing market share to be lost and isn't responding aggressively...those are all reasons to fire a CEO. If the CEO is just generally inept, that's a reason to fire the CEO. However, lots of very good companies have weird stock fluctuations that don't really affect the underlying value of the company itself. In this case you had a very high IPO price that was essentially the result of "media hype" and in fact that was good for Facebook; because of all that media hype Facebook the company (not Mark Zuckerberg) raised billions of dollars it can now use to make capital improvements or invest in new technologies or etc to increase revenue. On the balance sheet I'd be surprised if Facebook is not doing better right now than it was before the IPO just because it has more cash laying around. (I am aware they had a revenue decline in their first earnings report after the IPO.)

[OttoVonBismarck]

I'm sure Zuckenberg is still bound by some laws.  In this country, you can't do whatever you want just because you own 50%+1 shares of the company.

I don't think anyone is arguing Zuckerberg can buy slaves or launch missiles at the White House, but a normal stock-issuing corporation is overseen by a board of directors. The board is selected by shareholders and a majority of the board can make decisions like hiring and firing a CEO. As long as Zuckerberg controls enough shares to elect a majority of the board, there is little reason to assume he could be remove for any reason whatsoever. I'm sure there might be some really rare exceptions, but I'd be surprised if in general a majority owner of a company can be forced out of the position of CEO. If the minority stakeholders don't like it their recourse is to sell their shares. Now sure there are shareholder lawsuits that can arise over various things.

Plus, what exactly do you guys think Zuckerberg has done? He made the investment bankers who handled the IPO mad? That's not against any sort of government imposed corporate regulation I've ever heard of. He didn't give shareholders the time of day? Again, what regulation is he violating? That's perhaps bad business, but if he owns a controlling stake in the company it doesn't really matter, their recourse is to sell their shares. I know there is some weird law out there now about CEOs not performing "good service" or something, but I'd need to see that statute before I'd conclude Zuckerberg was in violation of it.

[DGuller]

I'm sure Zuckenberg is still bound by some laws.  In this country, you can't do whatever you want just because you own 50%+1 shares of the company.

I don't think anyone is arguing Zuckerberg can buy slaves or launch missiles at the White House, but a normal stock-issuing corporation is overseen by a board of directors. The board is selected by shareholders and a majority of the board can make decisions like hiring and firing a CEO. As long as Zuckerberg controls enough shares to elect a majority of the board, there is little reason to assume he could be remove for any reason whatsoever. I'm sure there might be some really rare exceptions, but I'd be surprised if in general a majority owner of a company can be forced out of the position of CEO. If the minority stakeholders don't like it their recourse is to sell their shares. Now sure there are shareholder lawsuits that can arise over various things.

Plus, what exactly do you guys think Zuckerberg has done? He made the investment bankers who handled the IPO mad? That's not against any sort of government imposed corporate regulation I've ever heard of. He didn't give shareholders the time of day? Again, what regulation is he violating? That's perhaps bad business, but if he owns a controlling stake in the company it doesn't really matter, their recourse is to sell their shares. I know there is some weird law out there now about CEOs not performing "good service" or something, but I'd need to see that statute before I'd conclude Zuckerberg was in violation of it.

Doesn't matter how much stock you own, I'm sure you can't agree to sell the entire company for 1 cent per share to another entity happened to be owned entirely by you, even if the majority of the shareholders (i.e. you) votes for it.

[alfred russel]

There is good reason Zuckerberg doesn't care about the stock price, that money is basically fake money to him. On IPO day Zuckerberg sold enough shares at $38 or whatever stupid number the shares were trading at so that he'd basically have $5bn in actual cash. He basically is now permanently uber-rich no matter what.

That is a good reason why Zuckerberg should not be the CEO.  Your argument boils down to "dont blame him for the share collapse.  He got his and now he doesnt care what happens to the share price."

Now that is prime CEO material right there. 

It is a rather Orwellian concept that a guy founds a company with priorities ostensibly beyond the bottom line, is forced by law to go public, and is then forced out because he has priorities other than the bottom line.

It is worth remembering that facebook made a billion dollars after taxes last year--and Zuckerberg founded the company in his dorm room not too long ago. Whatever his focus is, he has produced some really remarkable returns in a very short period of time.

[CountDeMoney]

It is a rather Orwellian concept that a guy founds a company with priorities ostensibly beyond the bottom line, is forced by law to go public, and is then forced out because he has priorities other than the bottom line.

Predatory capitalism has a food chain all its own.

[Darth Wagtaros]

There is good reason Zuckerberg doesn't care about the stock price, that money is basically fake money to him. On IPO day Zuckerberg sold enough shares at $38 or whatever stupid number the shares were trading at so that he'd basically have $5bn in actual cash. He basically is now permanently uber-rich no matter what.

That is a good reason why Zuckerberg should not be the CEO.  Your argument boils down to "dont blame him for the share collapse.  He got his and now he doesnt care what happens to the share price."

Now that is prime CEO material right there. 

Isn't it?

[OttoVonBismarck]

Doesn't matter how much stock you own, I'm sure you can't agree to sell the entire company for 1 cent per share to another entity happened to be owned entirely by you, even if the majority of the shareholders (i.e. you) votes for it.

Why are you sure of that? I don't doubt it, but you don't actually have anything I've seen to back up that assertion. I've owned decent sized (for regular people like myself) stakes in companies that got bought out before, and the documents I got about it always basically indicated the shareholders would vote and if the majority approved the buyout price then I'd receive that value in cash or equivalent shares of the acquiring company.

[Neil]

It seems like the nature of corporate governance has changed.  Where once the CEO's job was to maximize profits in pursuit of the company's goals, these days it seems that most people feel that the only thing a CEO should be concerned with is maximizing shareholder value and laying off CdM.