After IPO-mess, Facebook's CTO announces departure

Facebook, facing a raft of lawsuits from investors seeking to recoup losses from its botched IPO, laid out on Friday how cascading Nasdaq trading glitches might have stoked the confusion that marred its 18 May  debut.  But despite the downward spiral, many employees made millions with stock awards. On Friday, chief technology officer Bret Taylor - overseer of the social network’s main platform and mobile business - announced he was leaving this summer, becoming the first senior executive to break ranks. “It’s certainly a negative when so soon after the company has gone public that key people leave,” said Pivotal Research Group analyst Brian Wieser. [caption id=“attachment_346428” align=“alignleft” width=“380” caption=“SEC quizzed Facebook about the potential impact of growth. Reuters”] [/caption] But he said such post-IPO departures are not surprising, as executives whose equity shares in the company have vested, cash out and move on. “It’s not something that you would take as a vote of no-confidence” in the company, Wieser said. He noted that investors are primarily concerned about Facebook CEO Zuckerberg, Chief Operating Officer Sheryl Sandberg and Chief Financial Officer David Ebersman. Facebook’s IPO was to have been the culmination of years of breakneck growth for the cultural phenomenon. But it became mired in controversy as more than a dozen shareholder lawsuits accused Facebook and its underwriters of obscuring the company’s weakened growth forecasts ahead of the May 18 stock offering. Nasdaq OMX Group Inc  has also been sued by investors who claimed the exchange operator was negligent in handling orders for Facebook shares. Nasdaq spokesman Joseph Christinat declined to comment on Friday. In the motion filed late Thursday, Facebook - the first U.S. company to debut with a market value of more than $100 billion - defended its pre-IPO disclosures on mobile user revenue growth. The motion cited reports that Facebook had told underwriters about lowered revenue forecasts but not amended its prospectus. Plaintiffs “ignore that what Facebook and the underwriter defendants allegedly did both followed customary practices and did not violate any rules,” according to the motion. Playing Favourites Reuters reported on 22 May that analysts at Morgan Stanley and other top underwriters cut their Facebook estimates just over a week before the IPO and told some institutional investors about the unusual step in conference calls. A series of filings on Friday revealed that the Securities & Exchange Commission quizzed Facebook about the potential impact of growth in mobile users in the months leading up to the social network’s initial public offering and asked the company to make the risks plainer. “Assuming that the trend towards mobile continues and your mobile monetization efforts are unsuccessful, ensure that your disclosure fully addresses the potential consequences to your revenue and financial results rather than just stating that they ‘may be negatively affected,’” the SEC wrote in a February 28 letter to Facebook Chief Financial Officer David Ebersman. In court papers filed late on Thursday before the U.S. Judicial Panel on Multi-District Litigation, Facebook and the banks said the U.S. District Court in Manhattan was the “most appropriate and convenient forum to oversee these coordinated and/or consolidated proceedings.” Consolidating the many lawsuits leveled at Facebook may help reduce distraction for a company struggling to convince Wall Street it can maintain its growth rates and persuade marketers of the benefits of advertising on a platform with 900 million users. Internet retailers at a Chicago conference last week voiced worries about a lack of reliable data on the impact of ads on Facebook and many said they were reluctant to switch to paid advertising without that. General Motors upset some investors when it announced days before Facebook’s debut that it saw little reason to pay for ads on the social network. In the short term, however, Facebook has to fend off accusations it played favorites with disclosures and avoid potentially hefty damages from irate investors who bought into a company valued at 100 times earnings. Facebook cited on Friday a series of news reports that described how trading errors compounded uncertainty on  18 May after the start of trading in its shares was delayed by about half an hour. The motion cited lawsuits “alleging that technical problems and other trading-related errors affecting Facebook’s stock - which Nasdaq subsequently admitted - created market uncertainty and caused investor losses.” IFR, a Thomson Reuters publication, reported on Friday that Nasdaq was still testing for the consequences of a significant change to its IPO procedures the evening before Facebook’s troubled debut. The change, which made compelling commercial sense for Nasdaq and was introduced just weeks ahead of Facebook’s debut, allowed the exchange to capture orders for IPO securities  on the first day of trading. The previous system only allowed Nasdaq to capture orders in a 15-minute pre-opening bookbuilding phase. The fact that the extra time allowed the exchange to gather a greater number of orders that were then fed into the 15-minute bookbuild is significant because Nasdaq acknowledges the volume of trades during that period exposed a software glitch that gummed up IPO trading, IFR reported. Reuters