- Because if anyone had read the Facebook IPO prospectus, they would have learned, among other things, the following:
- Facebook's growth rate was decelerating rapidly.
- Facebook's user-base was rapidly transitioning to mobile devices, which produce much less revenue.
- Facebook's operating profit margin was already an astounding 50%, which suggested it had nowhere to go but down.
- Facebook's CEO had a nearly unprecedented amount of control over the company.
- Facebook's CEO had set up this astounding level of control intentionally. Mark Zuckerberg knew all about how impatient public-market shareholders are. And he set up the whole company so he would never have to pay attention to their whining.
- In the 9 months following the IPO, insiders would be free to sell more than 2 billion shares of Facebook that they had been holding for years.
- Facebook was going public at an astoundingly high price for a company with these characteristics—about 60-times the following year's projected earnings, in a market in which other hot tech companies like Apple and Google were trading at less than 15-times.