From this article on the Facebook IPO: http://business.time.com/2012/05/22/facebook-ipo-fallout-four-lessons-from-a-troubling-public-debut/?xid=rss-topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+time%2Ftopstories+%28TIME%3A+Top+Stories%29#ixzz1vcJsPamb
But the truth is that Facebook’s valuation had grown so large — thanks to several huge venture-capital rounds totaling a record-breaking $2.2 billion — that by the time the offering reached the public, it was already overpriced. In other words, insiders (and others, like Goldman Sachs, which invested $500 million last year at a $50 billion valuation) bid up the company’s stock price, leaving little upside for public investors. “The I.P.O. system only works if it preserves a balance between public and private investors,” writes the New Yorker‘s John Cassidy. “If this balance is upended, and virtually all of the rewards are reserved for insiders, ordinary investors will refuse to play the game. A dearth of I.P.O.s would hurt insiders along with everybody else.”
Yup … if the CEO and the board aren’t peeling off the fruits of the company, the big banks and Wall Street investors are driving up its stock price so only the insiders can play.
The world has surely changed when the little guy can make 6 figures and still not get a foot in the door. Sheesh …
