The rapid rise and fall of Facebook’s stock has given us a new financial term: Zucked.
It refers to the sudden wealth loss that occurs when a dot.com stock plunges and the founders see their paper fortunes vanish into the digital ether. It’s like the dot.com bust of the early 2000s – but with a faster cycle of wealth creation and destruction.
At least the dot-commers got to enjoy their fantasy fortunes for a couple years. The social-media and current web crowd had just a few months (or in some cases weeks) to feel the joys of being a paper billionaire.
Steven Kaplan of Chicago University’s Booth School said the latest hyper-cycle of tech wealth reflects the fact that fortunes are highly dependent on the daily swings of stock markets and fickle moods of investors.
“The social media fortunes have been very volatile,” he said. “This reflects the fact that the valuations of social media firms have fluctuated wildly over the last year with fluctuations in investor expectations about future company cash flows and success.
"To some extent, this mirrors the volatility of fortunes in the dotcom era at the turn of the century – 1999 to 2001," continued Kaplan. "Expectations then proved to be wildly optimistic for many companies. The future value of today's social-media fortunes will depend on the cash flows and performance that the social-media companies are able to generate.”
Of course, individual investors have also lost big on these companies. And the losses of the social-media founders shouldn’t generate much sympathy, since many are still worth hundreds of millions or even billions of dollars.
Yet the social-media bust has revealed just how manic today’s tech wealth has become. Here are five of the biggest losers in the social-media and web bust. Of course, these fortunes could always come back as quickly as they fell. But for now, these founders are, well, Zucked.
Mark Zuckerberg – It’s fitting that the poster boy of social-media wealth has become the poster-boy of social-media wealth loss. When Facebook debuted, Zuckerberg’s shares in the company were worth around $20 billion. He was richer than the Google guys and was briefly the 29th richest person on the planet.
What a difference two months makes – not to mention an earnings miss. Zuckerberg’s paper fortune has fallen by more than $9 billion since May. He’s now worth around $10.8 billion. His world ranking has fallen to below 72, according to Forbes. He also fell off Bloomberg’s list of 40 richest people.
Does Zuckerberg care? He'd probably say no. He’s trying to change the world, not get rich. But in Silicon Valley, money is a measure – if not the measure.
Dustin Moskovitz – The 28-year-old who helped Zuckerberg found Facebook owned about 133 million shares at last count. Those shares were worth more than $5 billion at the IPO price. Now they’re worth less than $3 billion. So his paper loss is more than $2 billion. It’s less than Zuck’s loss – but losing 40 percent of your wealth matters more when you’re down to your last $2 billion.
Eric Lefkofsky – Lefkofsky invested $1 million with Andrew Mason to launch Groupon. That $1 million stake is now worth more than $830 million. That’s an enviable return. Especially since Lefkofsky already cashed out to the tune of more than $200 million before the IPO.
Still, Lefkofsky’s paper fortune in Groupon has fallen by more than 75 percent. His stake was worth more than $4 billion during his IPO honeymoon. Lefkofsky is still a billionaire with his other Web holdings. But his Groupon fortune has dwindled and Lefkofsky recently announced he’s going to be spending more of his time and energy on his other companies.
Andrew Mason – Groupon CEO Andrew Mason has had an on-again, off-again relationship with the billionaires list. Before the IPO, estimates placed his holdings in the company at around $840 million. After the IPO, when the shares toped $30, Mason was a bona-fide billionaire. It lasted all of about 18 days.
By the end of November of last year, the shares were starting to slide. They’re now trading at less than a quarter of their IPO value. His current Groupon net worth: around $300 million.
Mark Pincus – The shaggy-haired founder of Zynga hit a paper net worth of more than $1 billion when the stock reached its peak of close to $16 a share. Since then , the stock has fallen to below $3 a share. Pincus’s stake is now worth around $270 million.
As investors in Zynga know all too well, however, Pincus took money off the table before the stock hit its lows. In March, several corporate executives and invstors sold stock in a special offering, with Pincus selling about $200 million in stock.
I would guess he didn’t invest the money in social-media stocks.
-By CNBC's Robert Frank
Follow Robert Frank on Twitter: @robtfrank
