The Facebook IPO: Why Facebook Subscribers Should Get a Piece of the Action

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Mark Zuckerberg… you need to share the wealth from the Facebook IPO.

During a Wednesday morning appearance on the FoxBusiness "Varney & Co." program, Money Morning's Shah Gilani said the Facebook Inc. founder and CEO should reserve 20% of the potential $100 billion initial public offering (IPO) for some of the company's 600 million subscribers – since they're the folks who really made Zuckerberg the king of social networking (as well one of the youngest billionaires in history).

Given that the Facebook IPO is likely to be one of the hottest ever when the company goes public next year, Gilani said that his proposal would probably be the only way the average investor could get a piece of the company at the offering price. Otherwise, retail investors who really want to own Facebook shares will be forced to buy in on the secondary market after Facebook's share price has experienced what's expected to be a stratospheric zoom. So he challenged Zuckerberg to make this pioneering move.

"Zuckerberg made history with Facebook – and now he's the king of social media and social networking – the man with the Midas touch," said Gilani, a former Wall Street insider and Money Morning commentator who operates the Capital Wave Forecast advisory service. "But now it's time for him to give some of the gold that he's earned as the head of Facebook back to the people who helped make that happen."

Added Gilani: "Facebook was Act One for him. This kind of pioneering move with the Facebook IPO could be Act Two – the encore. If social media is a force for good, this would be Zuckerberg's opportunity to once again prove he's a real social innovator."


Insights on the Facebook IPO

Gilani found a receptive audience in Varney, the popular FoxBusiness host, who labeled it "an excellent idea for getting investors into Facebook – which nobody can at the moment, unless [they] are a billionaire."

Gilani, a regular Varney guest, had been on the Tuesday show, as well – and the Facebook IPO had been the topic. But when Gilani outlined to "Varney & Co." producers his proposal to distribute shares to Facebook subscribers after his Tuesday appearance ended, Varney himself issued an invitation to return on Wednesday.

Giving Facebook subscribers access to shares at the offering price would actually be simpler than it might seem, Gilani insisted. Facebook could reserve 20% of the IPO shares for Facebook subscribers, and then dole those shares out via a lottery, Gilani said. Without such a reserve, it's a near-certainty that virtually all the Facebook IPO shares will go to wealthy investors – most of whom have connections with the decision-makers at the brokerage houses or investment banks that will receive allocations of the newly minted stock.

Gilani discussed his idea with Bill Singer, a noted New York securities attorney, and the two concluded that the lottery proposal could be put into action.

And altruism doesn't have to be the sole motivation for Zuckerberg, either. The company's most ardent subscribers are likely to be deeply loyal shareholders, too – especially those who get into the Facebook IPO via the lottery. Those folks will probably view the shares as more of a badge of honor than an investment, and will be loathe to dump them during tough times. And that will help put a floor under Facebook's stock price, Gilani insists.

"Most of these people are very likely to hold onto their shares – recognizing that they're part of the social-networking group that broke historic new ground," Gilani said. "Zuckerberg will see that it's just good business."

Facebook is the most anticipated of the current crop of Internet-related firms that are now going public – a group that includes LinkedI n Corp. (NYSE: LNKD), Groupon Inc. and others.

A key factor that will determine the timing of the IPO is a Securities and Exchange Commission (SEC) mandate that companies must start publicly disclosing key financial information once they have more than 500 investors.

Because of this rule, Facebook recently disclosed that it would likely start filing those disclosures "no later than April 30, 2012."

Gilani intends to push this idea.

"Mark Zuckerberg should stand up and say: ‘This is what social-networking is all about.' He should be the point man," Gilani said. "You're already a pioneer. How about doing this for your Second Act. You're already a billionaire, you're already one of the richest men in the world. You've already done all that. But here's a chance to really make a mark, to break new ground, and to make a statement. You claim that your real interest is in the advancement of social networking. Here's a challenge that will prove it."

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About the Author

Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish… and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.

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  1. karen Pezderic | June 23, 2011

    I think Shah Gilani is brilliant in his suggestion and I have no doubt that the simplicity and ultimate positive result all the way around will make sense to Zuckerberg and appeal to his sensibilities.
    I am among the many who, would Love to be on that lottery list!!!

  2. RMH | June 23, 2011

    I agree. This would be a ground-breaking action of monumental proportions. So, how does one get their name on the lottery list? And how much capital will be needed to invest? That is, is there a minimum ?

  3. Choo Hader | June 23, 2011

    Social media a force for good? LMAO! Social media just a way for Big Brother to compile a massive database on all its citizens. Big Heeb Brother now knows practically everything about everyone – all info volutarily submitted of course. All the better for them to sort people for the FEMA concentration camps that are coming after the economic collapse.

  4. Art Chastain | June 23, 2011

    Excellent idea Shah Gilani, this could be a good way for the average independent (non-professional) investor to buy an IPO at initial offered price. If a small percent of the IPO was set aside and offered as a lottery at brokerage houses to their customers in a numbered certificate form these shares would be so sought after their value would exceed the underlying . I don’t think Zuckerberg/Facebook should be the only IPO to offer this lottery. A Chastain

  5. Marcus D. Meadows | June 23, 2011

    Í've been there and done that. Suits me, and sounds great

  6. Heidi Walter | June 23, 2011

    What a great idea. I would definitely want to be part of a lottery.

  7. Karena | June 23, 2011

    This will be a historical financial event indeed. A brilliant idea. I definitely would hold my shares.
    How can we keep updated on this IPO and the requirements.

    Karena

    Art by Karena

  8. EEJ | June 23, 2011

    I definitely want to be in this lottery. Keep me posted.

  9. Kathy O'Connor | June 23, 2011

    I would like to be on the lottery list too! However, would also like to know if there is a minimum amount. How can we find out the pertinent details?

  10. Wendy Gardner | June 23, 2011

    How do I get in on the lottery and is there a minimum requirement to purchase shares?

  11. Jake McAuley | June 23, 2011

    If the lottery happens I think everyone who is on Facebook will be in the lottery or on the lottery list. We will have a 1 in 6-7 hundred million chance/

    Better than no chance! I'm in: http://www.facebook.com/mindsharemedia

  12. Bella | June 23, 2011

    Fantastic idea I will be hoping to get my shares and it will bring a lot of youngerbgeneration into the share Market
    It can only go up

  13. acline | June 23, 2011

    One more voice asking: How does one get on an IPO lottery list, and is there a minimum investment?

  14. fred | June 23, 2011

    What's going on, didn't you read the article, there is no lottery, it was Shah's Gilani's suggestion, it doesn't mean it's going to happen.
    So, chill out, everybody. It's exactly this kind of hype that causes investors to lose money.
    But there is also a report Goldman Sachs is setting up the fund to circumvent the 500 rule, each fund counts as one investor only, no matter how many people are in it…
    So this IPO may not happen after all, you just have to wait and see.

  15. Aileen McKAY | June 23, 2011

    Yes I'd like to be in on this lottery – keep me posted.

  16. Karl Schumaker | June 23, 2011

    Great Idea.

  17. Bert Botta | June 23, 2011

    If Zuckerberg agrees to this and is a key player in helping to implement this opportunity to those of us "small frys" then he will help to hugely further the future of social media.

    I believe this because the evolving premise of social media has been founded in a rather "forced generosity" to give things away (content, offers, etc.) to increase one's social media business.

    This forced generosity has become ingrained into social media and into the people who are involved in social media so this move by Mark would be yet another gift that the world of social media offers, maybe unconsciously, to the general public.

    Hey who knows, world peace may be next!

    Blessings

    Bert

    So this move by Mark would

  18. robert j. lycan | June 23, 2011

    I would love to get in on this IPO. All the others are sopped up by the insiders. Give me a chance to get in via the lottery. Tell me how!

  19. Robert Tunstall | June 23, 2011

    Would like to be in on lottery

  20. William Patalon III | June 23, 2011

    Hey folks:

    Thanks for the comments. If you really like this idea, let me make two suggestions.

    First, forward the story link onto as many of your friends and famiily members as you can (I've reposted the link below).

    And forward the story link to Mark Zuckerberg at Facebook. Let's let him see how much interest there actually is.

    Let's take this viral.

    Thanks for your help on this….

    Bill Patalon III
    Executive Editor
    Money Morning

    Here's the story link:

    http://moneymorning.com/2011/06/23/the-facebook-ipo-why-facebook-subscribers-should-get-piece-action/

  21. C Northcutt | June 23, 2011

    Please keep me posted.

  22. Sheila Mohn | June 23, 2011

    Definitely want to be in on this lottery…how to get on the IPO list?

  23. Hans J. Thimm | June 24, 2011

    Better than a lottery: Offer to each and every Facebook user who is a member for a minimum amount of time (to prevent speculators who only now sign up to profit from the IPO) a certain maximum amount of shares for a nominal price. Acceptance and payment required before a certain deadline.

  24. Pete Holden | June 24, 2011

    I am a surviving combat veteran of the Viet Nam War USMC 1965-67.
    It would truly be nice if we were finally able to catch a break and be a part of this historical financial event, especially in this topsy-turvy world of uncarring, deceitful, and corrupt politcians and the fat cats on wall street who use their power to continuously bleed our country dry for their own gain and benifit.

    Please keep me informed as how to get in on this IPO.

    Thank you

  25. Dalla Mae | June 24, 2011

    like try hit lotto be on the lottery list. We will have a 1 in 6-7 hundred million chance I'd have more of a chance FB lotto just got decline for a loan @ WELLS FRAGO not even in that much in the hole just want me to s- – – load of money in their bank. lol…

  26. Alex Anderson | June 25, 2011

    As a Pastor, I use Facebook as a tool to stay connected with over a thousand church members. What a great idea to give those who depend upon it and support it the most a great opportunity.

    Great Idea. Please keep me posted.

    Thank you.

  27. Laurie Delk | June 25, 2011

    Yes – I think that would be awesome if they would allow an initial IPO that is public.

    Reposted this link – please post updates of news ;)

  28. Meredith | June 26, 2011

    The problem with the lottery is the same perpetual problem of our current global laziness. Something for nothing.

    Much better is the proposal by Hans Thimm, 6/24. Offer Facebook USERS, not speculators, the shares. Something like "a member for a minimum amount of time (to prevent speculators who only now sign up to profit from the IPO)".

    The downside is that the HUGE political interests ($$$) from Wash D.C., the BANKS, and the "payback" usually tied to the IPO's, may prevent any such thing. Zuckerberg probably is not immune. We will see.

  29. Jane | June 30, 2011

    This is one of the best ideas I have heard of that levels the playing field at least for the % of IPO Shares that would be put into the lottery. Mark be brave and follow through! I will be trying for the lottery for sure.

  30. Paulline Lindhorst | July 1, 2011

    Sounds good. I'd like to get in on it.

  31. Leon | July 15, 2011

    Note to all who are salivating and hyperventilating over fb ipo.
    Instead of acting like blind sheep,better to look before you leap.

  32. Jason | July 16, 2011

    I think that only 20% to subscribers is to low. let the people who made FB have the chance to get in on this investment. instead of the rich getting it to get even more rich!!!!!!!

  33. monkey | August 11, 2011

    Are you people stupid? "How do we get in on this lottery?" OR "What is the minimum investment?" IT DOESN"T EVEN EXIST PEOPLE! You act as though the author of this blog is somehow connected to Facebooks IPO. Sure it would be fantastic if Facebook did that for the subscribers but you idiots act like it is actually going to happen, and you're inquiring what the minimum investment is, as if they have already rolled it out. The rich will get richer, and the poor….well let's see, the poor post messages on blogs hoping to become rich.

    LAME

  34. monkey | August 11, 2011

    OH and one more thing, all of you ignorant baffoons act like it will be a "blessing" to get in on this "historic event" As if the makers of FB actually give a F*(# if if the FB users are able to buy shares. The swamp donkey users of FB will still use it even after they are not given a chance to buy the IPO. As if FB is looking out for your best interest in this "historic event" AND did you ever stop to think that none of you will "get rich" off this IPO. IF they even let you look at the IPO they MIGHT let you buy 1 or maybe 2 shares. You aren't going to be investing in for 2,000 shares and become rich overnight. Unless you think making $10,000 makes you rich.

    Man you people are such swamp donkeys.

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