An interesting Q&A in this weekend's Barron's with William Hambrecht, whose firm underwrote Google's unusual dutch auction IPO in 2004. Hambrecht addresses what went wrong in the Facebook offering:
Are there a few lessons in all this?
Google stands in contrast to Facebook. Google went public fairly early in its growth cycle, so investors could participate in the upside. Facebook was huge when it came public. Google chose our modified Dutch auction to avoid the insider game. The private auction opening price was $85, and Hambrecht's retail bid stack [it handled only individual orders] indicated a higher bid of $97. With Google, the issuer, not the underwriter, made the pricing decision. That decision was based on the stack of actual auction bids. Google came public in August 2004, opening on the first day at $100.01. Since then it has steadily increased more than fourfold. On the other hand, Facebook looks like a deal dominated by insiders.
This idea was batted around regarding Facebook, but probably didn't happen because some of the investment banks who underwrote the offering were already big Facebook investors.
Can we find new ways to use technology to reach buyers through these social networks while providing institutional access?
One scenario would be to form a co-op partnership with an issuer's best customers giving the retail bids for up to 50% of the deal at a preferred price. Samuel Adams founder Jim Koch took his company [Boston Beer (SAM)] public but gave his customers a chance to participate. He placed little hangers on bottles in six packs announcing the deal in the months beforehand. The response was overwhelming and could easily have comprised the entire issue. Now, more than 15 years later, 30% of the original 30,000 Sam Adams customers still hold the shares, worth $127.12 apiece, versus $15 originally. When customers believe in your product over the long term, they also believe in your shares. That's the kind of shareholder base you want.
You can imagine how this would have worked... promos to buy the IPO right in your Facebook news feed.
More in the full interview.