3 Ways Facebook Changed the IPO Roadshow
This wasn't your run-of-the-mill IPO roadshow, all power-suits and PowerPoint.
No, Facebook's IPO, which wrapped up this week, was less of a series of boardroom meetings and more of a traveling circus, complete with sideshows and a ringmaster, and newspaper men swarming the doors. Media coverage so far has focused on the rock-star atmosphere and has centerd the spotlight on everything from the star-seeking crowds to Facebook founder Mark Zuckerberg's deliberately slouchy clothing choices.
"It's like trying to get into a Bruce Springsteen concert," one attendee told the Boston Herald. "Usually at a roadshow, there's no security and no wait. This is unheard of."
Turns out, there's more to Facebook's IPO roadshow that could potentially change the game for how companies going public pitch their stock, and present themselves, to the country's biggest underwriters and investors.
1. It took aesthetic risks—of the Hollywood variety.
Aside from the media hype, once inside Facebook's presentation, what truly stood out was the video. It was wasn't just a PowerPoint slide deck, which is the usual. Instead, it seemed more like a half-hour jazzed-up infomercial on the history of the company, with high production values and a soundtrack, designed for someone who knows little to nothing of how Facebook works. It ran longer than a TV newscast, and not only sold the vision of a single company, but also the grander idea that social connectivity is the future of business in a global marketplace.
That video could break the mold for future IPO roadshows, says Sam Hamadeh, founder and CEO of PrivCo, a business and financial services research service based in New York City. "From now on I bet other Internet companies will look at that and say 'I never thought of that,'" he says. "Why not do a commercial, a movie about the company?"
2. It shifted strategies mid-game.
But the most crucial segment in a roadshow stop is not the video: it's the question-and-answer period that follows the video and presentations. This is the big chance for underwriters to feel out the company—and to get to know the intangible essence that you can't pick up from SEC filing documents, says Timothy J. Loughran, a professor at finance at Notre Dame's Mendoza College of Business.
"What investors are trying to get is some sense of future profitability," he says. "The analogy of job interviewing is exactly right. You get them into your office and say 'This is not a good fit.'"
Facebook was criticized in its early roadshow in Boston for relying too much on its 30-minute-long video presentation and leaving time for just a handful of questions.
The company subsequently dropped the video and let executives Sheryl Sandberg and David Ebersmann give a 15-minute presentation and answer several more questions, and continued on that path for the rest of the tour of eight cities across the country, from Boston to Denver.
Loughran says: "The big picture is: It gives the opportunity for investors to kind of see how articulate management is."
3. Stay true to yourself.
Zuckerberg, one of the world's youngest billionaires, riled up the business community by wearing his trademark hoodie and jeans in New York to kick off his cross-country pitch of the company he started in his Harvard dorm room. Some say that's fitting; others say that's disrespectful of the buttoned-up investment community Zuckerberg was apparently attempting to woo. Well, we all know one thing: Rebelling is cool. Also, tempers seemed to cool by the time the roadshow got back to California Friday; Zuckerberg wore a grey T-shirt and got little gruff.
Chief financial officer David Ebersman and chief operating officer Sheryl Sandberg both went for more traditional business attire at their presentations, showing that dark colors, clean lines, and grace under fire are never out of style.
TIM DONNELLY | Columnist | Inc.com Contributor
Tim Donnelly is a freelance writer and managing editor of Brokelyn.com. His work has appeared in Billboard, The Atlantic, Thought Catalog, and The New York Post.