Thursday 19 October 2017

Video: Brokers woo Facebook staff in hope of sharing stock bonanza

Photo: AP
Photo: AP
Peter Flanagan

Peter Flanagan

BROKERS and other money managers have begun to descend on Facebook's Dublin staff in the hope of getting their hands on some of the fortunes that will be doled out to employees if they sell their shares.

At least one broker yesterday cold-called staff offering their services, while another is believed to have sought a formal arrangement with Facebook to offer its products to staff.

Employees of the social networking site are in line for a huge windfall when the company starts trading publicly as they will then be able to cash in their stock options once they have fully vested. For more than a third of the firm's 400 Dublin staff, those options will be worth more than €100,000 on the open market and would provide the hobbled financial community here with a potentially lucrative source of business.

Investments

The broker's formal offer to the company is unlikely to go anywhere, however, not least because of possible legal ramifications if investments were to go sour in the future.

Facebook filed documents last night setting the wheels in motion for one of the most hyped initial public offerings (IPO) in recent years.

The contest for Facebook business among the Dublin money management community is a microcosm of the battle among the Wall Street investment banks to lead the company to market.

Morgan Stanley ultimately won that contest, although other banks including Goldman Sachs will play lesser roles.

The flotation is expected to value the company at between $85bn (€64bn) and $100bn only eight years after Mark Zuckerberg set up the website while a student at Harvard University.

The price of Facebook shares has yet to be hammered out but speculation has focused on the $5bn sale being priced at between $35 and $45 a share.

The flotation is set to make millionaires out of a host of staff at the firm, but it may be shunned by some investors scared off by the over-arching control that will be retained by Mr Zuckerberg.

Under the filings published yesterday, the chief executive will retain control over nearly 57pc of his company, while he will also be able to handpick his successor if he remains at the top of the firm into old age.

He will also have the power to choose and retain board members.

Downside

The concentration of power in Mr Zuckerberg's hands is not unusual in the tech industry -- Google followed a dual listing structure similar to the one Facebook is employing when it went public in 2004 -- but the structure does raise possible corporate governance issues and may deter some investors.

"Zuckerberg, at the time, probably had his choice of investors," Steven Kaplan, a professor at University of Chicago's Booth School of Business told Reuters. "He basically had the ability to say 'my way or the highway'.

"The downside of doing this is that the value of Facebook may be slightly lower than it would be if he were not retaining control," he added.

Mr Zuckerberg will also come under pressure from investors to dramatically ramp up his website's revenue and profit capability.

Facebook made $1bn on revenue of $3.7bn last year but that is dwarfed by Google's performance and there have been doubts raised about the social media company's ability to scale up its profitability quickly.

Irish Independent

Also in Business