FORTUNE --There are lots of lessons to be drawn from the Facebook IPO: Don't let your CFO scrounge for every last dime. Make sure your CEO pays wardrobe deference to Wall Street. Remove board members who are more loyal to their bank accounts than to the company. But those are all relatively minor compared with the big takeaway from this debacle: Don't go public.
Do you remember Facebook (FB) before the IPO? It was the Fonz, somehow straddling the invisible line between accessible and unobtainable. Then came May 18, and Facebook suddenly morphed into Potsie -- more style than substance, and just a bit creepy. In short, uncool.
Facebook lost favor the moment its shares began trading on Nasdaq, not when it dropped its financial drawers several months earlier. The social network had easily remained a media and venture capital darling after publicly disclosing that its growth had begun to slow (as is normal for an eight-year-old company) and that it faced significant challenges migrating its desktop success to mobile devices.
All that really changed on May 18 was that something that once belonged to a relatively small group was now common property. What must really burn up Mark Zuckerberg, of course, is that he knew such a transformation could occur. He was part of a generation of tech entrepreneurs who came of age after the dotcom meltdown and who generally viewed IPOs as an unnecessary evil. Unless your company was desperate for cash, why subject it to analysts' whims, regulatory oversight, and the media scrutiny that accompany public listings?
No wonder Zuckerberg's letter to prospective IPO buyers began with the lines: "Facebook was not originally created to be a company. It was built to accomplish a social mission." Translation: I'm being dragged into the public markets kicking and screaming.
Like Google (GOOG) before it, Facebook had run up against the arbitrary number of outside shareholders it was allowed to have before being required to publicly disclose certain financial data. For all practical purposes, that meant it was time to list.
So Facebook filed for its IPO on Feb. 1. Two months later Congress increased the outside-shareholder limit fourfold, as part of JOBS Act legislation designed to increase initial public offerings (via reduced reporting requirements, etc.). That's right: A pro-IPO bill could have resulted in Facebook's indefinitely postponing one of the largest IPOs in American history.
MORE: Facebook's China problem
This is where I have to think Zuckerberg would like a mulligan. Congress had given him an easy out, but he ignored it. Maybe he was worried about an employee revolt, given that so many paper millionaires were already scoping out Palo Alto real estate. Maybe he was softened by LinkedIn's (LNKD) IPO success in June 2011, to the point that he overlooked subsequent post-listing troubles for both Groupon (GRPN) and Zynga (ZNGA). Or perhaps he just got carried along by the momentum of the thing.
No matter the ultimate reason Facebook went public, its subsequent experience serves as a stark reminder of how IPOs can flip a company's entire script in a single day. Think of all that the company has lost in exchange for cash it didn't really need. Why wouldn't CEOs of other large tech startups take a serious look at long-term alternatives for shareholder and employee liquidity, perhaps via the burgeoning secondary market for private company stock?
Some Silicon Valley folks insist that Facebook is an outlier, an anomaly in terms of how fast it grew and how fast it's falling. But they are wrong. Facebook is the embodiment of why going public often causes problems for large, successful startups.
Maybe Congress knew what it was doing by simultaneously seeking to promote IPOs while exempting Facebook from immediate listing. Unfortunately, Zuckerberg didn't take the hint. The uncool kids rarely do.
This story is from the October 8, 2012 issue of Fortune.
There will be a flood of shares hitting the market when employees and insiders sell, which could hurt the new shareholders the most.
FORTUNE -- Add taxes to the potential reasons the social network's stock didn't pop in its IPO. The issue is the $4 billion dollars that will be owed by Facebook's employees as part of their stock windfall in six months. That tax bill is almost certain to lead MOREStephen Gandel, senior editor - May 18, 2012 2:44 PM ET
Idle speculation, while waiting for Facebook to go public.
Mark Zuckerberg recently skipped a meeting of bankers and analysts at Facebook HQ, according to The Wall Street Journal. The report said that he "preferred to focus his time on developing the service," and that he "doesn't expect to play a hands-on role selling" the company's upcoming IPO.
Clearly this is a guy who still hasn't warmed up to the idea of his company MOREDan Primack - Mar 21, 2012 12:01 PM ET
Pay at the social media company makes Wall Street's fat cats look skinny.
Where's the Occupy Facebook movement?
Earlier this month, when the social media company filed for its initial public offering most of the attention was focused on the fact that Facebook could be worth as much as $100 billion. But what didn't get a lot of attention, or scrutiny, was what the company pays its top executives. It's a ton MOREStephen Gandel, senior editor - Feb 16, 2012 10:00 AM ET
Yesterday the Wall Street Journal got a huge amount of attention for reporting that Facebook is preparing to go public next year in an IPO that could value the company in excess of $100 billion. It became the top story on HuffingtonPost, and got prominent links/rewrites everywhere from Reuters to Drudge.
Huh? I've read the WSJ story several times, and can't find any information that hasn't been previously reported. The only MOREDan Primack - Nov 29, 2011 12:08 PM ET
Before you start scrambling to get a piece of the Facebook pie, it's worth looking at a few glaring risk factors.
Excuse me for raining on the Facebook parade, but yesterday's news about the $450 million investment by Goldman Sachs (GS) and $50 million from Russia's Digital Sky Technology didn't move me the way it seemed to move others. This despite the suggested $50 billion valuation, as big and beautiful a MOREDuff McDonald, Contributing Editor - Jan 4, 2011 12:13 PM ET
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