Facebook (NASDAQ:FB) may have fashioned itself as an anti-Wall Street, Silicon Valley upstart, but that didn’t stop a top executive from meeting with the ultimate Wall Street insider for advice following the company’s disastrous initial public offering, the FOX Business Network has learned.
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The meeting between Facebook chief operating officer Sheryl Sandberg and Larry Fink, the chief executive of money-management powerhouse BlackRock (NYSE:BLK) occurred in recent weeks, as large investors have increasingly lost confidence in the social-media giant’s business model, and shares have hit new lows, according to people with direct knowledge of the matter. Shares of Facebook have lost more than 60% of their value from the highs achieved during its May IPO.
Facebook officials have been scrambling to address investor concerns about deteriorating revenues and profits, as well as a lack of a clear business plan to translate the reams of data Facebook receives from its 955 million active users into revenue and profit growth.
People with direct knowledge of the meeting say Fink agreed to talk to Sandberg at the behest of a mutual friend, though he does have more than a passing interest in Facebook’s success; BlackRock is Facebook’s sixth-largest shareholder, holding 1.73% of outstanding shares.
These people say Fink and Sandberg discussed both the IPO, and why it was priced at such a lofty level, at $38 a share, and how the social media giant might improve its stature with Wall Street.
One person with knowledge of the meeting said Sandberg told Fink that the pricing was based in part on the desire of Facebook to make it difficult for Wall Street traders, known as “flippers”, from immediately selling shares at a profit after they were freed to trade.
A spokeswoman for BlackRock had no comment, but would not deny that the meeting took place. Fink, who is said to be traveling to Germany to meet with European Union officials, had no comment. A Facebook spokesman also had no comment.
Facebook recently denied a report by the FOX Business Network that Sandberg met with a prominent institutional investor to discuss the IPO, among other issues.
Facebook’s dealings with Wall Street have been frosty in the months leading up to the IPO. Chief Executive Mark Zuckerberg initially balked at meeting with investors during the IPO “road show” where investors meet with top executives of a company as it prepares to go public.
Many investors took it as a snub from a company that has shown little if any regard for Wall Street as it prepared to go public, and underwriters were told Zuckerberg might attend other venues but would likely skip the all-important New York road-show date.
Zuckerberg ultimately relented and made a brief appearance in New York where the top institutional investors had gathered. Still, many large investors weren’t appeased, nor were they appeased by Facebook’s business prospects, which show slowing growth in users, revenues and ultimately profits.
As a result, large investors didn’t bid up shares significantly during the IPO. When glitches in the Nasdaq trading system caused delays in buy and sell orders, shares began to decline rapidly without support from large investors. Shares have continued their decline with many investors saying they won’t be significant buyers until Facebook’s stock settles, possibly in the low teens.
The meeting with Fink, one of Wall Street's most prominent officials, is seen as an olive branch by the company looking for friends on Wall Street, though it’s unclear if Sandberg made the sale. According to one person with direct knowledge of the meeting, Fink asked Sandberg why she was more concerned with flippers and not company insiders who are now selling shares, like venture capitalist Peter Thiel.
“From what I understand she didn’t have a great answer,” this person said.