Is Zuckerburg Too Immature to Run Facebook?
Facebook (NASDAQ: FB) investors, watching the social network's stock plummet, are increasingly asking if Mark Zuckerberg is man enough to run a multi-billion dollar social network.
Facebook's stock slid to an all-time low of $18.75 Monday morning, falling to less than half the initial public offering price. The stock rallied before markets closed Monday afternoon to just above $20 a share, but dipped below $20 and were still dropping this morning as top initial investors kept hitting the "sell" button.
Zuckerberg, who famously launched Facebook from his Harvard dorm room in 2004, is without a doubt a social media genius who has changed how people communicate online. And Facebook rolled along fine for years, amassing members, selling advertisements, even garnering an award-winning movie about Zuckerberg, his friends and the legal struggles it took to launch the social network.
But this past summer, Zuckerberg and company decided to try yet something else -- an initial public offering with an astronomic $100 billion valuation -- which many experts warned might be too high for a company with no assets beyond a website in an increasingly competitive social networking market.
And with Zuckerberg as the largest investor and controlling shareholder, suddenly a 28-year-old college dropout was at the top of a company whose wealth on paper was more than that of many small nations.
A Bumpy Ride
The IPO was supposed to be the start of a hugely profitable upswing for Facebook. Instead, Facebook has faced intense scrutiny since going public, with Zuckerberg taking the heat for dropping stock prices. Suddenly, the boy-genius who could do no wrong became Public Enemy No. 1 to investors who threw their money behind the deal, in hopes of becoming wealthy beyond their wildest dreams.
Many investors began to think the boy in the hoodie just wasn't man enough to handle their money -- and they're calling for his head on a platter -- or at least to remove him from the top office and to put him some place where he won't do any harm.
Zuckerberg isn't doing much to keep the investors at bay, either. While he knows better than anyone how to get people talking and sharing online, he has demonstrated little acumen in learning how to court investors or how to talk them into keeping the faith.
When people invest millions of dollars into a company, they expect its leader to look like a leader, not to dress like a frat boy in a t-shirt, jeans and flip-flops. True, Zuckerberg put on a suit to meet with President Barack Obama, but witnesses compare his investors' meetings to pep rallies, which do little to assure investors that their money is safe.
Aside from his fashion choices, though, many of Zuckerberg's business decisions lately have been questionable. From the IPO's valuation, which many experts warned was too expensive, to a lone-wolf $1 billion buyout of Instagram, Zuckerberg's actions demonstrate a seemingly immature pattern of business thinking.
Zuckerberg and Jobs: Similar Paths?
If Zuckerberg steps down as CEO, he'd join a long list of tech innovators who founded businesses, only to find their companies matured more quickly than they did.
For example, Zuckerberg and Steve Jobs share many parallels beyond the fact that both dropped out of college. The revered Apple co-founder was a household name at the age of 30 and had all the money and power in the world when he was forced out of the top office at the company as its fortunes plummeted.
In 1981, Apple went public and Jobs hired John Sculley to be its new CEO. Just a couple of years later, the Mac debuted in 1984 to disappointing sales creating financial distress and by the spring of 1985, following a power struggle between Sculley and Jobs, Apple's board sided with Sculley and removed Jobs from command of the Macintosh group. Shortly thereafter, Jobs left Apple.
Of course, Jobs went on to join Pixar and NeXT, garnering valuable experience in business. By 1996, Apple brought him back, and the rest is history. However, had Apple not decried Jobs' relative immaturity -- and his refusal to adapt to corporate culture -- he may not have left the company for 10 years.
Zuckerberg could also be compared to Google founders Larry Page and Sergey Brin, who in their late 20s brought in tech veteran Eric Schmidt, who experts said was hired to provide "adult supervision" to help Google grow.
In a similar Facebook scenario, Zuckerberg could remain as chief product officer -- instead of taking his immense talents to another company, like Jobs did -- and do what he does best: innovating changes to keep the social network thriving. New management with a history of running large companies such as his could have the opportunity to come in, reassure investors that their concerns are being met, and run the company in a more mature manner.
In the Meanwhile...
Facebook's stock, continues to plummet, being valued at approximately half of the IPO valuation of $38 a share -- and the problems may get worse, leaving Facebook's board little choice but to replace Zuckerberg, if he can't turn the company's fortunes around. For his part, Zckerberg insists he is looking at Facebook's long-term goals and not worrying about the stock market.
Last week, Facebook freed up about 271 million shares of stock, allowing inside investors to dump some of the stock they bought when the IPO was announced. The resulting sell-off dropped stock prices even more drastically in the past week, in what's being called a dress rehearsal for this October, when an additional 192 million shares will be released, and in November, when 1.2 billion more will be released.
With so many shares on the market -- and with a CEO investors increasingly distrust, it's little wonder there isn't a run on Facebook stock, despite the website's 945 million users.
Unless Zuckerberg can convince investors that he's mature enough to run the company -- and he can find a way to make Facebook's ads continue to pay -- he may find himself where it doesn't matter if he's wearing a hoodie: at home. ♦
Categories: News Desk | Social Media