LEX Most companies hit the road with their bankers to publicise an initial public offering. Facebook will have Hollywood to tell the story of its founding myth. Playing with its share structure this week was another step in the always-denied but long-expected process towards a public listing. A hit film release next year might provide the perfect platform to generate interest. If Facebook does call “action”, however, investors should approach stock in the social network with caution.
That Facebook has followed Google’s by adopting a dual share structure – where select shareholders enjoy voting rights of 10 times their economic interest – should be a warning sign. The performance of companies adopting such measures is mixed, but it is a reminder that tech companies have historically not cared about shareholders. Dividends are rare, and shares are used too frequently for acquisitions or paying staff. Google’s stellar performance remains the exception, not the rule. Investors might ponder why, if Google’s prospects are so great, not one insider has spent their own money on stock since the IPO.
