Facebook's IPO hype: Blame the media?

The social network's disastrous public offering burned a lot of small-time investors, many of whom were caught up in media-driven hype

Mark Zuckerberg at Harvard University last year
(Image credit: AP Photo/Steven Senne)

This week, Arthur Brisbane, the public editor at The New York Times, took his own paper to task for not expressing enough skepticism about Facebook's stratospheric stock price before its disastrous IPO on May 18. "The Facebook story seemed to ride an ever-higher wave of media attention," says Brisbane, sweeping up average investors who wanted a piece of the company led by Mark Zuckerberg, whom The Times praised in hagiographic fashion as belonging to "a line of revolutionaries stretching back to Gutenberg." Since the IPO, Facebook's share price has plunged from $38 to the mid-$20 range, causing significant losses for investors. Are The New York Times and other media outlets to blame for the IPO hype?

Yes. The media wasn't skeptical enough: We could have done more, "especially for the general reader who relies on The Times to explain the risks of the stock market," says The Times' Brisbane. The paper failed to adequately examine signs that Facebook's stock price was overpriced, given the company's weakness in the smartphone market and other areas. On the day of the IPO itself, The Times should have waved "a red flag prominently" instead of reporting that tech IPOs often achieve double-digit gains on the first day. "Closer attention to the needs of the average reader could have yielded more focus on the risks, more skepticism, and an even better outcome."

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE
https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up
To continue reading this article...
Continue reading this article and get limited website access each month.
Get unlimited website access, exclusive newsletters plus much more.
Cancel or pause at any time.
Already a subscriber to The Week?
Not sure which email you used for your subscription? Contact us