Prior to the Facebook IPO, Wedbush securities analyst Michael Pachter took a lot of heat for saying that Mark Zuckerberg shouldn’t have worn a hoodie on the roadshow.
Pachter thought it was disrespectful, but at the time everyone thought the complaint was ridiculous.
Anyway, in light of the Facebook flop we followed up with Pachter to see if he feels vindicated now.
And actually he does think the hoodie mattered. He suggested in his response that if Zuckerberg wore a suit—and showed investors respect—that maybe people would be trusting him more now to be a steward of their money.
Here’s Michael Pachter’s full email which he sent to Business Insider.
The flop is 100% a function of a supply/demand imbalance. The company and its underwriters misjudged demand, and simply issued too many shares. There is no question that had this deal been 1/3 the size, the market would have absorbed it and the deal price would have held.
With that said, my comments about Mr. Zuckerberg’s attire merely pointed out that investors expect him to behave in their best interests, and are leery of investing in companies where the CEO (and controlling shareholder) has priorities that may be misaligned with their own. I felt that had Mr. Zuckerberg worn a jacket instead of a hoodie (showing them that he respected them enough to “dress up”), he would have made a statement to them that he cares about their needs, and will act in their best interest. He chose not to make that statement, and the current share price demonstrates that investors have chosen not to support Facebook shares.
All of this is iterative. Had Facebook issued 10 million shares instead of 421 million, the stock would probably be much higher. However, had Mr. Zuckerberg worn a jacket and reassured investors that he is aligned with their expectations, perhaps more people would be stepping in to buy now. He made a choice to maintain his persona as a hacker, and that has served him well with users and employees. It has not necessarily served him as well with investors.