Facebook: The Icarus Effect

That's because the exercise will make 27 year-old Zuckerberg even richer whist he gets to hang on to 57 per cent of voting rights and thus continues, effectively, to run the company even after floatation. However, whenever Hubris rears its head, Nemesis is never far behind and as several unreconstructed Mormons have learned in recent years, these days you can't have your Kate and Edith too.

In a note to investors, ISS, the organisation that provides advice to more than 1,500 big institutional investors in the US, pulls no punches and is extremely critical of the contentious 'dual share' mechanism detailed in Facebook's IPO prospectus which will permit Zuckerberg to continue running the company after selling off a chunk of it to outside investors.

ISS comments "This is a governance profile with a defence against everything apart from hubris. The IPO event itself presents a Hobson's choice: accept governance structures which diminish shareholder rights and board accountability, or miss out on what appears to be one of the hottest business models of the Internet age."

Facebook has enjoyed truly spectacular growth but it cannot continue at such a rate indefinitely - especially in terms of attracting ever-more advertising from which the company actually makes its money.

Advertising revenues accounted for 85 per cent of all Facebook revenues last year and if that slips into reverse and the company has nothing with which to replace it, then the company will lose value even more quickly than it accrued it in the first place.

As ISS writes,"the real dilemma of Facebook's dual-class structure will only become evident when (or in a best-case scenario, if) an autocratic model of governance makes it less viable than a competitor whose governance gives owners a voice proportionate to the economics they have at risk."

Current expectations (largely excited by media and analyst hyperbole, it must be said) have it that Facebook could be worth US$100 BILLION and thus the biggest technology IPO ever - until the next one.

Mark Zuckerberg has said that Facebook will "always be free to users" but he may well change his tune if, or, more likely, when the gilt rubs off the gingerbread and we get to see the wormy wood underneath. Then the company may find that it will have, reluctantly, to introduce a usage fee and then tens of millions of users will simply up-sticks and head over to another free service. That's the nature of the Internet beast.

And as for the floatation, if past examples are anything to go by, the share price will rise for a while after the IPO, allowing traders to hold the shares in cyberspace for a millisecond or two, make a cent of two per share and then bail out, never to return. What is called the "velocity of circulation" of stock will be astonishing and the ones left holding the parcel when the music stops will live to regret it.

Meanwhile, one of Mark's many acolytes should check that the waxy wings he is wearing aren't getting a wee bit warmer and weaker the closer he flies to the sun. If they fail, it's long drop to the wine dark sea, as Icarus discovered.