Alexei Oreskovic and Sarah McBride wrote this great article for Reuters about how the upcoming Facebook IPO will create at least 1000 new millionaires among the Facebook employees. The article, published on December 8, 2011, with its reactions, Twitter tweets, Facebook likes, and LinkedIn (ticker: LNKD) shares has meant a lot of daydreaming for the lucky, and not so lucky few. With an estimated IPO float of $10B, Facebook, the world’s leading social network, is expected to trade as a public company with a lofty $100B valuation.
Even with a customary six-month lock-up after the IPO before employees can cash in — the real question is whether these talented Facebook employees will stay — or just cash out and leave. Will there be a mass exodus of talent at the company within a year of the IPO? What would you do if suddenly your stock options were worth millions? Would you just go to work per usual, or would you go do something else?
As I’ve stated before, I think it’s one of the main reasons that they’re stepping up their acquisition strategy. They want fresh talent — new hungry employees not sitting on tens of thousands of stock options — with fresh challenges in the development of new platform features, rethinking the Facebook user experience, and revamping and refining the revenue and monetization development models. There is work to be done, as long as great talent stays to help. Is this what happened to Yahoo (ticker: YHOO), Microsoft (MSFT), and many others? Sure they have great talent at both these companies — but at some point do the real “rock stars” who helped these companies succeed just wander off and do something else with their money? Sure some will start other companies — but others might just relax for a while and enjoy their newfound wealth.
Evaluating this is part of the research for whether I, or you, should buy the Facebook IPO? In either case maybe it’s starting to look like buying some shares early and some shares after the six-month lock-up could be wise. If the insiders, venture capitalists, angel investors, long-time employees, and others cash out there could be downward pressure on the stock with all the new shares coming to market.
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