The Price of Facebook

"You can stop pretending we're only old classmates," Ethan told Judy. "The next time your family gathers, take me along."

She hit his shoulder, smiling. "I have a question for you. Am I moving into that enormous house?"

"You want to?"

"I like Nicole, Gal, and Charlize. I get along with Mary-Kate and Ashley. Why not?"

"Because a house full of people doesn't become a home just because I say so. They'd need time, and so would you."

Judy leaned against him. She was not asking to move tomorrow. She wanted to know whether he was prepared to make room for her in public as well as in private. Ethan suggested visits first and no surprise announcement over dinner.

"You make it sound like a board meeting," she said.

"You'd run one if I let you."

"I'd win it." Judy turned toward him. "Tell me how many women you've kept outside that house. Honestly."

He hesitated. Alexandra Daddario was one person he could name. Elena Olsen was an adult with whom he had a private history, one Ashley and Mary-Kate did not know about. Avril Lavigne was different: after the Grammy night, Ethan could not claim a relationship that had never been agreed on. Those distinctions did not give Judy the army she wanted.

Judy counted on her fingers. "The women at home will close ranks if you try to move me in. They'll tell you to choose. Five voices against one is an easy contest."

"So what would you do?" Ethan asked.

"Build my own side before they set the terms. A second house, perhaps. If the numbers are closer, they'll have to negotiate instead of issuing an ultimatum."

Ethan stared at her. "You're talking about my life as if it were a takeover."

"I'm talking about what happens when five people can demand anything from one. You won't like their terms, and neither will I."

"And where do you plan to find your side?"

"You tell me who is already there. If there aren't enough, perhaps we should meet more people." She said it with the composure she brought to a negotiation. Ethan could not tell how much was a plan and how much was provocation.

"You're a dangerous strategist," he said, kissing her cheek. "I'm glad you were on my side at UCLA."

"That sounds suspiciously like work."

"Then let's discuss an actual company." He sat up. "I'm taking Facebook public soon. After that, I intend to make an offer for Warner Bros. If we acquire it, I want you to run the studio."

Judy stared at him. "Warner?"

"Not because of what happened in Beijing. Because you've spent years seeing problems before the rest of the room does. Warren, Billy, and Bordeaux all have strengths. You're the one I'd trust with a company that size."

She had built her own fortune, but Warner was on another scale. Ethan could see the doubt she did not usually show.

"You would back me when the decisions got ugly?"

"I'd expect you to make them. I'd back you when you did."

"Then let me see everything you have on Warner before I answer."

He promised to ask Carol to send the files. He also raised an allocation in Facebook before the listing. Judy shook her head at once: at the likely valuation, a meaningful stake would cost more than she could comfortably put into it. Ethan proposed giving her an insider price. The terms would have to appear in the offering paperwork, but he wanted her to have the chance.

"First the Warner documents," she said. "Then we talk numbers."

That was the Judy he knew. Ethan laughed. She asked for a little time alone with him before going back to work. He wanted it too. She closed the office door, and they spent the next half hour together in private.

After Judy left, Carol came in with a stack of files. She sensed something had changed between them, though neither had said a word. Ethan took the documents and let her keep her guess to herself.

• • •

The following week, he arrived at Facebook's newer Silicon Valley headquarters. The company had outgrown its original offices as its users spread through North America and Europe. Ethan had bought an entire building the year before. There were still empty desks, but not for long if the expansion continued.

Managers were already gathered when he entered the conference room. They knew why they had been called, yet the room held a nervous silence until he sat down.

"We've worked toward this for years," Ethan said. "Today we talk about the listing and the employee allocation. Fitz, did you give them the valuation?"

"I thought they should hear it from you."

"The current offering valuation is one hundred fourteen and a half billion dollars."

For a moment nobody spoke. MGM, after its return to the top tier of studios, was worth a fraction of that. Facebook's value rested on an expectation that a network already woven into daily life would become still harder to replace. Ethan thought the market might price it higher once trading began, but he could not promise it.

In the other timeline he remembered, Facebook had waited until 2012 to list at a valuation in roughly the same range. This company had reached the market earlier with revenue streams and geographic reach its counterpart had developed later. Those differences were why he believed the price could hold. Belief was not a guarantee.

YouTube held ten percent. AK Films and BK Films each held five. Ethan had discussed a potential three-percent allocation for Judy, subject to documentation and disclosure, and expected to retain a direct stake between ten and fifteen percent. The remaining holdings and offered shares needed to be reconciled in the final prospectus; he did not intend to announce a personal fortune based on an incomplete cap table.

Investment banks had asked for access before. He had turned down private offers from groups that wanted a cheap entry. Employees, however, had helped build the company.

"Subject to the offering documents," he told the room, "we're reserving up to three percent for an employee purchase program priced against half the current valuation. That is a pool worth roughly one point seven billion dollars at the program price. You'll have a week to decide how much you can take. Consider it my thanks for the years you put into this place."

The managers broke into applause. Fitz looked almost stunned. Ethan knew not everyone could afford a share of the pool, and he did not mistake the room's excitement for a completed sale.

He stayed several hours to review filings and operational reports. As Fitz walked him out, Ethan stopped by the car.

"Come to Nasdaq with me when we open trading. You should stand there."

"Me?"

"I know what you did to get us here."

Fitz thanked him twice, then watched the car leave. After the excitement faded, he would have to decide how much of his own money he was willing to commit.

In the back seat, Ethan opened the Time Warner materials. Peter kept glancing toward him in the mirror.

"Watch the road," Ethan said. "Once in intensive care was enough for me."

"I'm watching it. I wanted to ask you something."

"Go ahead."

Peter's third child, a boy, had been born the previous month. He wanted to put money aside for college and wondered whether Ethan might lend him enough to buy Facebook shares at the opening.

"You've worked for me three years and had two children in that time," Ethan said. "I'll give you something for the baby. What you buy with it is your call."

Peter thanked him. Ethan returned to Warner's balance sheets as the car joined traffic.