Social Networking: From Main Street to Wall Street

This afternoon on CNBC's "Closing Bell", the CEO of Morgan Stanley (and a fellow Columbia Business School alumn), James Gorman,was forced to face the social networking music in an exclusive interview with Maria Bartiromo. The dark-haired Aussie defended the pricing of the hot IPO, citing unprecedented market demand and particularly the demand from retail investors.  Now, with the stock, while trading off it's lows, the stock closed down 22% eradicating  $3.5+ bn in shareholder value.

Back in 2004, it was unfathomable to picture a world where parents, grandparents, bosses, etc. would be perusing the same social networking site as I was. Nine years later, and with the entire family armed with iPhones, Facebook serves as my primary means of communication (outside of text messaging, of course).  Having created my Facebook account the summer before arriving as a Freshman at college (literally seconds after getting my .edu email address), I've seen the site transform itself from a bare bones profile page, with photo upload capabilities and some key profile data points (relationship status, undergraduate university, interested in, etc.) to an online digital media center, personal event planner, and chronological memory bank for the past ten years of a person's life on Facebook.

 So of course there was going to be unprecedented retail demand for the IPO.  Retail investors are what breathe life into Facebook every minute of every day in every timezone.  Facebook users, are the value proposition. Unfortunately, and as with many high profile events, the spotlight ran a muck on the offering and particularly with the series of events that took place on Friday, May 18th, the first day of trading. It was like watching the ball drop on New Years Eve, except when the clock struck 11am, the confetti canons failed to work.  Everyone was looking for some acceptable explanation behind the delay.  Statements from the exchange later attempted to assuage the [trading] public.  Yes, trading glitches take place all the time (ie. delayed reporting, late fills, spillage, etc.) just unfortunate to have taken place when everyone, including my retired parents, were watching.

Facebook, now must serve its shareholders, adding value wherever and whenever possible.  I'm skeptical that this mandate will truly align itself with what lies at Facebook's core, namely a social network that allows people to share information they want with those who they want to share it with.

 

http://www.cnbc.com/id/47632941