MEDIA Investors, Analysts Question Facebook CEO's Leadership


"Yes, the numbers will speak for themselves," said valuation expert Jeff Corbin of Facebook's coming IPO. "But there is more to a company than numbers. It's about the character and attitude of management, particularly the CEO. It's about understanding a company's growth plan beyond a moral vision." Facebook plans the IPO for May 18.

Facebook is going public and it's pricing itself at $96 billion. If the social-media darling actually pulls in that much cash at its initial public offering, it will make stock market history. But questions linger.

But Facebook's IPO could falter. The company has made some recent moves that are causing some to question the leadership. Then there are privacy concerns that could affect revenue, as well as questions about long-term revenue growth.

Red Flags Rising

We asked Rob Enderle, principal analyst at the Enderle Group, to offer his take on Facebook's chances to meet analyst expectations at its IPO. Like others, he's keeping a close eye on how recent events, including the leadership style of founder and CEO Mark Zuckerberg, might affect investor decisions.

"You certainly don't want to put a large investment into a company that is poorly led. Part of the problem is the Instagram acquisition," Enderle said. "Zuckerberg acquired a $1 billion company with 11 people without any board involvement or any help, really. So it creates the specter of an out-of-control CEO, and that's a problem."

Beyond the Instagram buy, Enderle also pointed to issues around revenue growth. Facebook revenue appears to be slowing. Others argue that consumers are growing tired of too many social networks. Will it put a damper on the IPO?

"It depends on what happens when Facebook finally goes public. Right now this is just a lot of noise but it's raising red flags and it doesn't take a lot for this market, which is pretty flighty any way, to decide to step back and wait it out," Enderle said. "It certainly doesn't make for a stronger IPO in any case. It creates the increasing likelihood that they may not have a strong IPO."

Zuckerberg's Character Questioned

Jeff Corbin, CEO of KCSA Strategic Communications, is a valuation expert and has been an investor relations professional for 15 years. He also has some thoughts on the Facebook IPO. The fact that Zuckerberg might -- keyword "might" -- show up at some of the roadshow events troubles him. He's also troubled by a few other issues.

"What other Instagram-style acquisitions are in the works?" Corbin asked. "You need to shed light on what you mean when you say you plan to make frequent and rapid product decisions that may reduce short-term revenue or profitability even though they are consistent with your overall mission."

Corbin also asked two more pointed questions: How are we supposed to value Facebook based on so much uncertainty (or lack of clarity)? How do we value what it means when you say you will improve the aggregate user experience to improve financial performance over the long term?

"I'll say it again -- I don't want to be all doom and gloom. With a user base approaching 1 billion, there is no question that Facebook has the ability to grow in a big way. The issue I have is one of communications," Corbin said.

"Yes, the numbers will speak for themselves, but there is more to a company than numbers. It's about the character and attitude of management, particularly the CEO. It's about understanding a company's growth plan beyond a moral vision.

"And, it's about transparency in communications. Without a full understanding of each of these, a proper valuation cannot be determined."

You can also read the article here: