Term Sheet

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No, Facebook shouldn't have waited

April 11, 2012: 1:10 PM ET

Whiny bankers snipe at Facebook.

Facebook is getting some grief today for choosing to buy Instagram before going public, rather than waiting to make the $1 billion purchase until after its IPO.

From the New York Post:

The timing of that pricey purchase — coupled with a fresh bout of uncertainty in the stock markets — has raised eyebrows on Wall Street, where it is rare for a company to make such a bold move ahead of its public debut.

"People are wondering if [Facebook] couldn't have waited until after the IPO [to purchase Instagram]," said one source, who declined to be identified.

No wonder the source doesn't want to be identified: It's a ridiculous suggestion. In fact, it borders on asking Facebook to commit fraud.

If Facebook is planning to make a $1 billion acquisition, the largest in its history, isn't that a material fact that prospective investors should know before they buy shares? Or does the source expect Facebook to hide its intentions, thus inviting plaintiff's lawyers to descend on Palo Alto like ants on an abandoned picnic? Surely the source doesn't expect Facebook to announce that it's thinking about buying Instagram for $1 billion, and just letting that possibility swing in the wind for the next month.

No, this complaint isn't about whether or not Facebook is doing right by its eventual shareholders, or even by its own balance sheet. And this isn't about the concerns that Facebook could face antitrust scrutiny for anti-competitive behavior. It's about bankers bitching that their job just became incrementally harder.

More from the NY Post:

Zuckerberg held discrete talks with Instagram's founders and managed to keep underwriters in the dark about the sale until late in the process, sources said... While appetite for Facebook's shares is strong enough to withstand shaky market conditions, bank sources say stability makes it easier to "maximize" the company's valuation at the high end of the range.

First, "late in the process" is relative. Most $1 billion acquisitions take months to marinate, but Facebook pulled this entire process off in just a matter of days. That makes it entirely possible that Facebook's underwriters knew about the Instagram offer within 24 hours of it being made. In fact, it's likely.

But, again, the bankers are complaining because they'll now have to do a bit more work before collecting their Facebook fees. Rather than just collecting orders, they may also need to field a few questions. In other words, the low-hanging fruit has risen a few centimeters.

Whether or not Facebook should have paid $1 billion for Instagram is a legitimate topic for debate. Whether it should have done so in late May rather than in early April is not.

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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