Yes, We Can Blame Facebook and Its CFO for the Stock Debacle

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It's easy, and to a large degree proper, to blame the people who bought into Facebook's dog of an IPO for their own losses. It was no secret that the company's prospects were highly uncertain. But that doesn't mean that others can't be blamed as well, or that investors are the only ones hurt by the debacle.

Andrew Ross Sorkin in particular blames one man, and one man only: "It is David Ebersman's fault. There is just no way around it," writes the New York Times' Dealbook columnist.

Ebersman is Facebook's finance chief who acted as the company's point man on the IPO. Pinning the blame on him alone is reductive and ultimately inaccurate, as Sorkin tacitly admits lower in his column, where he notes how Wall Street banks, which had a collective interest in pricing Facebook's stock as high as possible when it hit the public markets, egged Ebersman on. It might be true that Ebersman is most at fault, but that doesn't exonerate the bankers or, for that matter, CEO Mark Zuckerberg.

Sorkin's column presumes that it's a bad thing that Facebook's stock is now worth less than half of what it was initially sold for, and that the people who sold it at that price are at least somewhat to blame. That doesn't seem like a crazy presumption, and it isn't. But predictably, the defenders of the indefensible are already sniping.

In an error-riddled post, America's leading frat boy, Mark Cuban, says that "Andrews Ross Sorkin" has written a column that is "just ridiculous."

Why ridiculous? Because capitalism. Because free market. Because buyer beware. Because money good.

"Facebook was able to raise about 10 BILLION DOLLARS in this IPO," Cuban writes. "The CFO's job is not to manage shareholder portfolios. His job is to help Facebook succeed. I don't know about you, but putting 10 BILLION DOLLARS in the bank in my opinion is one way to help them succeed."

He goes on in a language approximating English: "Who's job is it to help manage the portfolio's of FB investors? If an investor doesn't manage their own portfolio, the brokers who sold them the stock are responsible. It's their job to read the prospectus if you as an investor are too lazy to do so. It is the job of the broker to help the investor understand the value of the company and make a buying decision. No question that there are a lot of brokers out there that did not do their jobs."

The presumption here is that selling stock to the public is really no different from selling trinkets to tourists: If you pay too much for a shirt that falls apart the first time it gets wet, the blame is all yours. The seller might be a sleazebag, but you should know that going in.

True. But that doesn't make the merchant not a sleazebag, and it's still okay to call him one. But more to the point, there are considerations beyond transactional ones at work when it comes to floating stock to the public. Facebook's own employees have lost big on the value of their shares since the IPO. That can't help morale.

Further, Facebook's own reputation has been severely harmed. Unless its business performance somehow turns around enough to bring the stock back up to somewhere in the vicinity of its IPO price, that won't change anytime soon. The company has lots of cash thanks to the IPO. But what corporate executive wants to be in charge of a company known for having a dog of a stock? Facebook's public reputation is already precarious thanks to its sleazy ads and its casual approach to user privacy. Adding to that the notion -- fair or not -- that it also likes to bilk investors doesn't help. In the long run, it could even hurt relationships with partners and suppliers, and it could make it tough to recruit more talent.

Companies that are interested in creating real value over the long term don't want to oversell their initial stock floats for short-term monetary gain. That's what sleazy companies do.

Cuban isn't alone. Nicholas Carlson, a writer with the notorious click-brothel Business Insider, wrote a buffoonish response basically making the same argument as Cuban. "It's hard to remember," he writes, "but on May 17, lots of people thought Facebook was on its way to becoming a $200 billion company in a matter of months, weeks, days, or even hours."

And who led "lots of people" to believe this? Hint: look first to those who had the most to gain by selling too many overpriced shares.

Because of the IPO," Carlson continues, "Facebook has an $8 billion credit line. It has $6 billion in the bank. Right now, the company's stock price is where no employee would have predicted three months ago, but the company itself is in fine, fighting shape."

Such responses nicely exemplify capitalism's most serious problem right now: Its strongest supporters tend to be people like Cuban and Carlson, who refuse to look at the bigger picture, and who refuse to believe that there are any considerations in business other than maximizing short-term profits no matter what the cost.

Dan Mitchell has written for Fortune, the New York Times, Slate, Wired, National Public Radio, the Chicago Tribune, and many others.

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