December 13, 2011
A Dutch Auction Facebook IPO? Yes, please!
Posted by Usha Rodrigues

Don't get too excited, people, but in today's WSJ Franceso Guerrerra raised the prospect of a nontraditional Facebook IPO:

By virtue of its size, business model and popularity, Facebook is the rare company that doesn't need Wall Street to go public. It should press home the advantage and blaze a trail for others to follow.

Mr. Zuckerberg's has two options: a traditional IPO, in which banks distribute shares to investors in exchange for a percentage of total proceeds; and the little-used "Dutch auction" that cuts out the Wall Street middlemen by making the allocation of shares dependent on prices bid by each investor.

The biggest difference between the two systems, apart from the lower fees paid by companies in auctions, is that when IPOs go Dutch, banks don't choose who gets shares, giving all investors a fair shake and avoiding potential conflicts of interests.

Many Glom readers will remember that Google went public via Dutch auction in 2004, dubbed a failure by some, but an exercise in branding by Glom emeritus Vic Fleischer

I teach both the traditional IPO process and the Google IPO in my Lifecycle of the Corporation class, and students invariably love it.  So yes, please, bring on a Dutch auction!

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