In such an environment, marketing becomes your product and perception becomes reality. We are working desperately to increase the number of servers. Please forgive us, but we had no idea the product would be this popular. Many people believe that a public offering helps increase company and product awareness and provides a company with a cash arsenal to help fund the marketing expenses needed to compete in this new world. It would be hard to disagree with this position, however there are risks to such a strategy.
Executives seem shocked when their market values are halved.
However, the same game that is used to create marketing hype often times affects investor expectations. Therefore, mixing the fame game with the public markets can be a dangerous exercise, and management should be concerned with just how high investor perceptions really are. We suspect it is difficult for executives to understand why you would want to restrain your own stock price. This fall can be particularly damaging to companies that use stock options as their primary incentive for attracting employees. When a stock price falls in half, most strike prices are underwater, the employees are unhappy and everyone blames Wall Street for being short-sighted.