Diary of an IPO: The Facebook Quiet Period is Over

Posted by on June 27th, 2012

For the past month, I have followed Facebook’s lead and remained quiet during the “quiet period.” The reason for this was there was nothing to say. Everything that needed to be said was already said, and Facebook hadn’t put out any news of major business importance.

The quiet period is essentially a “cooling-off” period in which a company going through an IPO must be silent, so as not to inflate the value of its stock artificially.  However, the SEC said that, notwithstanding the quiet period, issuers are permitted to continue to publish “factual business information.”

Does the fact that Facebook didn’t put out any news suggest that nothing took place in the company during the past month?  Or, was the quiet period an excuse for remaining silent just because they have yet to figure out their communication policy as a public company?

Well, today the quiet period officially ends, and so does my silence.   I am anxiously awaiting the analyst reports from the banks that helped take Facebook public – especially Morgan Stanley who led the deal.  Once I get my hands on the reports I plan to compare them to what was in the prospectus. Theoretically, they should be the same. Under Reg FD, how could they not be? Unless someone was privy to information not made available to everyone.

I will be looking very closely at how the analysts model Facebook and if they can possibly justify an IPO valuation upward of $100 billion. Or, it will be interesting to see if their valuations are more in line with the company’s current valuation of less than $70 billion.

Once I have a chance to review, I will report back on what the analysts say and what investors should be looking for before investing more money in Facebook. In the meantime, I recommend that everyone subscribe to the company’s IR alerts (I subscribed immediately following the IPO but have only received one alert indicating that Ms. Sandberg was named to the company’s Board of Directors – very significant news).   Let’s see how many alerts we receive.  This is the information that theoretically should demonstrate how the company is going to grow its business, revenues and profits; how it is going to diversify its business model beyond advertising; how its advertising business is really doing; how the company will monetize its mobile platform that in my opinion is lousy; how it intends to communicate with those like me and you and whether there is a chance that it will be transparent with investors; and how it intends to behave like a public company and treat the investment community with the respect it deserves.

The quiet period is over.  This can no longer be an excuse for the failure of Facebook to communicate.  The company’s investor relations have been disgraceful to date.  But, the opportunity still exists for them to turn this around.

Stay tuned.