IP Uh Oh

Facebook IPO Blame Game: So Much For Trusting the Grown-Ups

Wisdom doesn't necessarily come with age.
swingers Facebook IPO Blame Game: So Much For Trusting the Grown Ups

Cause you’re growns-up and you’re growns-up and you’re growns-up!

It’s been less than a week since Facebook debuted on the public markets. But each day, it seems, unearths new contenders for another round of the Facebook IPO Blame Game. (Play along at home!)

While Congress plans its investigation into underwriters like Morgan Stanley, Dan Primack dropped an interesting perspective in his Term Sheet newsletter: Blame the “adults.”

Institutional investors also didn’t want Zuckerberg to take Facebook public unless he added some big-name “adult” supervision. After all, what does a 20-something know about running a multi-billion dollar public corporation? Just imagine the costly mistakes he would make.

Hence hiring seasoned executives like Sheryl Sandberg as COO and David Ebersman as CFO. But the hires meant to boost Facebook’s maturity level with the public markets may have backfired.

Mr. Primack, for example, has some choice words regarding Ms. Sandberg’s decision to recuse herself from the underwriter selection process based on her previous relationships at Google.

Pardon me, but wouldn’t such relationships actually have been important? Not to get bankers to take on Facebook as a client — everyone wanted them — but because she might have a better sense of who would, and wouldn’t, be the best fit? And, once Facebook did pick her pal Michael Grimes over at Morgan Stanley, wouldn’t it have been good to have a third opinion in the room — particularly one so close to both key players?

Mr. Grimes, if you’ll recall, helped Morgan Stanley lock down deals for the LinkedIn, Pandora, Zynga, and Groupon IPOs, which Henry Blodget credits to his “dork” cred and love of video games.

As the Wall Street Journal reports, Mr. Grimes was the Facebook CFO’s “main confidant.”

“This IPO was an Ebersman and Grimes show,” said one of the people familiar with the matter. “They were joined at the hip.”

It seems they both saw eye-to-eye on decisions that may have sealed Mr. Ebsersman’s fate as “Facebook fall guy.”

The Journal’s sources say it was Mr. Ebersman, backed by Morgan Stanley, who decided–less than three days before the IPO–to boost the number of shares Facebook would offer by 25 percent.

His main adviser at lead underwriter Morgan Stanley assured him there was plenty of demand, they said.

That decision by the 41-year-old Facebook executive may have doomed any real chance the social-networking company had that its stock would jump on its first day of trading—a hallmark of successful IPOs.

Now, just because an IPO pop makes a big noise doesn’t necessarily mean its a hallmark of success. But Mr. Primack notes, Mr. Ebsersman may also have been guilty of selective disclosure:

Then there is Ebersman, who oversees a financial operation that allegedly warned underwriter analysts — but not others — to cut Q2 guidance estimates (even if all it really said was “please start paying attention to what we said about mobile”). If true, what he (and MS) did may actually have violated securities regulations — and also means he shouldn’t be too quick to count his unvested shares.

While potential shareholders were fretting about Mark Zuckerberg’s controlling share of Facebook, who was watching the grown-ups table?

Follow Nitasha Tiku on Twitter or via RSS. ntiku@observer.com