Negotiation Skill: Leaving Some Value on the Table, or, Why Facebook’s IPO Failed


In any negotiation where parties must continue to interact and maintain a relationship, there is a hard cost to being overly competitive.

When you squeeze out every bit of potential value for yourself and leave as little as possible on the table for the other party, as Facebook did with the public, you shoot yourself in the foot.

Measured in reputational costs, brand value, and now, actual legal costs, the “smartest-guys-in-the-room” approach of the FB team backfired.

This is not a question of perfect hindsight: More than enough pixels and ink have been spilled over the FB IPO already. There are probably books and documentaries currently in the making about it. I only include it here in this blog (where I try to avoid being yet-another-armchair-quarterback on current events), because this is a worthwhile lesson to consider for a topic that I facilitate training in: Negotiation Skills.

Bottom line: $38/share and a boost in the initial offering size, done at the last moment, was a greedy move.

As the old saying goes,

“Pigs get fatter, hogs get slaughtered.”

Yes, I think FB could become the next Amazon rebound-and-quadruple story, from a stock pricing perspective, once the revenue generating potential of its platform is unleashed (FB Travel? FB Banking? FB Healthcare? FB University?)… and yes, there is a ton of liquidity out there searching for even a modest return on capital. Nevertheless, the FB guys outsmarted themselves. Some of the lead investors made out like bandits, but now the company as a whole has to deal with the costs… and that’s a double whammy for the holder of FB shares.

So another point to be gleaned from this:

Be aware of any misalignment between the people who are DOING the negotiating, and the people FOR WHOM they are negotiating.

As with anything, only time will tell for sure how things work out, but for now, there’s blood in the water.

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About danspira

My blog is at: http://danspira.com. My face in real life appears at a higher resolution, although I do feel pixelated sometimes.

Posted on May 23, 2012, in Business, Cool Companies, Learning, Negotiation, Psychology, Sales and tagged , , , , , , , , , , , , . Bookmark the permalink. 2 Comments.

  1. Of course, if you take The Social Network as truth (and it may only be as true as Charlton Heston’s Ten Commandments is an accurate depiction of the exodus), the move was very Zuckerberg-like: Ruthless and Self-centered. Good points made all around.

    • Agreed, DS! Zuckerberg and, by extension, Facebook, suffer a major branding problem, especially when it comes to that important concept called “trust.”

      I decided to hold back on commenting further on this because I wanted to wait until the dust had settled regarding the culpability of Morgan Stanley… but chances are, they were following the marching orders of their clients. Ah, ticker symbol NASDAQ:FB… while it appears to be priced a bit more “correctly” right now (@$26.31/share), I must acknowledge that (a) I’m no stock market bookie and (b) the aura of bad feeling seems to have clung to the whole thing.

      I happened to catch Jim Cramer ranting about the FB IPO, earlier this week. He said something along the lines of, “This was supposed to be a great story, where everyone was a winner!!”

      If only.

      It takes two to get to “win-win.”

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