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Three lessons from the Facebook prospectus

by Randall Craig on February 23, 2012

Filed in: Blog, Global Business, Make It Happen Tipsheet, Management, Viewpoint

Tagged as: , , ,

If you’re reading this, the chances that you are on Facebook are relatively high. And sadly, the chances that you personally will duplicate Mark Zuckerberg’s business success are relatively low. Very few of us will take our companies public, let along profit so handsomely during our careers.

What we can do, however, is learn from this success. And particularly, learn from the Facebook IPO.

The key to this is the prospectus. This document gives a prospective investor all of the information they need to make a knowledgeable investment decision.  Unfortunately, most investors – or members of the general public – never see the prospectus. Test this amongst your friends and family: how many of them have personally reviewed the Facebook prospectus, the most publicized IPO in the history of the world? Likely, very few.

If we dissect the prospectus document, there are three items that are highly relevant – and that most “non-IPO” leaders should consider:

1) Risk Factors:  This is a multi-page, open-the-kimono look at everything that might possibly go wrong.  Everything from tech trends to competitive threats to internal weaknesses, and then some.  Insight:  How often do companies – or people – openly and honestly look in the mirror?  (It’s easier to believe your own PR.)

2) History:  For several years prior to an IPO, the company must run their organization in a squeaky-clean, financially-sound manner, and their audited financial statements in the prospectus must reflect this.  Insight:  It is impossible to turn back the clock.  Three years from now, if you want to look back at a history of great results, then the great results must start in the present.  Interestingly, this is also true of our reputations, something that many people and organizations forget when it comes to Social Media.

3) Transparency:  If the goal of the prospectus is to ensure that all investors have what they need to properly make their investment decisions, then there should be no “hidden” areas of nondisclosure.  Within the document, you can find details on the controlling shareholders, executive compensation, legal considerations – and more – on 186 pages, plus exhibits.  There is complete transparency.  Insight:  Many organizations aren’t particularly transparent, instead rationing information to their employees, clients, suppliers, and other stakeholders.  Or worse, “spinning” it.  While not advocating the words of Facebook’s CEO Mark Zuckerberg (“privacy is a thing of the past”), what’s the worst that could happen if those around you knew “too much”?  Perhaps alignment, accountability, and better decision-making?

This week’s action plan: While writing a prospectus is probably not top of your to-do list, spending a few minutes on one of Risk Factors, History, or Transparency is probably doable.  Answer one of these questions this week:  What are the Risk Factors in my organization?  History: is there anything we should do now (or stop doing now) that will be important several years from now?  Transparency:  Where can we be more open with our colleagues, clients, suppliers, and other important relationships?

Postscript:  If you are interested in reading the Facebook IPO prospectus, it’s available here.

 Note: The Make It Happen Tipsheet is also available by email. Go to www.RandallCraig.com to register.

 

Randall Craig

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About 

Randall has been advising on Web and Social Strategy since 1994 when he put the Toronto Star online, the Globe and Mail's GlobeInvestor/Globefund, several financial institutions, and about 100+ other major organizations. He is the author of seven books, including the recently released "Everything Guide to Starting an Online Business", and speaks across North America on Social Media and Web Strategy. More at randallcraig.com and 108ideaspace.com.

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