When public offerings break records, as Facebook did with most shares traded on the day of its IPO, they do so because the company mirrors how we see ourselves — and the image of the future we want to project.
Before the tech bubble and the “new economy,” IPOs were about manufacturing strength and proven American power. That’s what the public offerings from General Electric at the turn of the 20th century and Chrysler and General Motors in the 1920s showed.
When Ford finally went public in 1956, it broke records as the largest IPO. By the time Americans could line up to buy a piece of the company, it had been around for 50 years. The stock market was driven by companies with established products seeking to expand, a growth idea that has been uniquely American.
The notion that a product didn’t have to be well-established to attract starry-eyed investors began in the 1960s. A company called Syntex produced a birth control pill that was brought to market with much fanfare but a short track record. It went on to become the leader in its industry and helped change attitudes toward contraception.
Despite its solid revenue and subscriber base, Facebook shows that it is possible to raise capital with little more than a marketing idea and great expectations. But the $104 billion question is simple: What does the excitement about the company reflect about the nation?
In the 1990s, investors were persuaded to get on the Internet bandwagon. Analysts pushed it as a time of unprecedented opportunities: After all, how would you feel if you missed the railroad boom after the Civil War or the opportunity to invest in the country’s infrastructure at the end of the 19th century?
Within five years, many of those new companies, online retailers or middlemen designed to reduce business-to-business costs, had disappeared. The ones that remained struggled with the expectations previously heaped on them. Their IPO prices reflected new concepts in finance. Not price-to-earnings multiples, but fuzzy math based on notions such as projected sales in five years to expected earnings. Basically, how much would the market pay for expectations? In some cases, quite a lot.
The companies that survived have transformed the way we shop and search for information. This is a technology and industry mostly developed and nurtured in the United States; its continued success is the country’s success. Even the government recognizes this and aids indirectly in the process. Goods sold on Amazon.com, for example, are still free of state sales taxes in most places.