It's big news: Facebook becomes a publicly traded company today with its Initial Public Offering (IPO). But who wins, we the people, or the wealthy few?
First, let's look at Facebook users. For them, the site is a great way to connect with people. Will the IPO enhance their user experience? Probably not. Facebook users are likely to see more ads, and have less privacy. Why? As a publicly traded company, Facebook's primary obligation is to please shareholders. Customer's are now secondary.
This is not an opinion; it is a fact, a legal reality. Facebook is incorporated in Delaware, as are most other large corporations. This tiny state sends a huge message: shareholders are number one. Delaware's legal code, called Title 8, does not mention customers, employees, local communities, society, or the environment. (For more information on Delaware and corporate law, see Part 2 of Deep Economics.)
Who benefits from the Facebook IPO? In short, only a small number of rich people. First, let's take the founders. Before the IPO, Mark Zuckerberg was worth $13.5 billion. Now he'll be worth $17 billion. Co-founder Eduardo Saverin was also a billionaire before the deal, and will be a bigger billionaire afterwards. But Saverin is concerned. He only has a few billion. He needs to be very careful about taxes now. So, he renounced his US citizenship and moved to Singapore. He got rich in the US, but now wants to enjoy his riches somewhere else.
Will loyal Facebook customers benefit by being able to purchase Facebook stock during the IPO? Of course not! The only people who get to buy IPO stock are ultra-rich investors. I wonder: How many of them have a Facebook page?
And last but not least are the banks. They were paid a lot of money to design and launch the IPO. And they will make even more money as people buy and sell Facebook stock.
So, today is a happy day for the wealthy few associated with Facebook, but hardly anyone else. Ask yourself: does the Facebook IPO reflect your highest and loftiest values? Do you support a few people getting rich at the expense of everyone else? To find out how capitalism can benefit a greater number of people, see Part 5 of Deep Economics.