I did a column about the nearly dictatorial authority Mark Zuckerberg will have over post-IPO Facebook notwithstanding its nominal status as a public company.
A related point that I wish I’d made and incorporated into the analysis is J.W. Mason’s argument about the shifting purpose of the IPO. One reason you don’t normally see an offering made on terms that are so friendly to the founder and so unfriendly to the new public investors is that the founder wants people to buy the stock. That’s because the classic purpose of the IPO was for a firm to raise money. You start out with maybe some cash scrounged up from friends and family, then you have a few initial rounds of private investment, but you reach the point where your company is so hungry for capital that it needs to open up to a broader public to get what it needs. Facebook’s IPO (and increasing number of other tech IPOs) isn’t like that at all. Facebook has plenty of cash and can more than finance its investment needs out of profits. Going public is a means of helping early investors and early employees cash out, not a way of raising investment capital. That’s fairly typical nowadays, but it’s at odds with the classical account of what the stock market is there for.