I don't think they priced it right, a $30 sell price could have created a 13% bump today, a big gain on opening day can create demand from retail. It changes the whole story, Facebook should know well enough the social effects of perception, even though the fundamental story is the same. The idea is not to cash out on IPO day, it's to create a story of growth and success and then cash out a few days later as the growth has whipped investors into a frenzy.

It reminds me of my realtor who would put houses on the market extremely underpriced generate huge amounts of interest. A bidding war would ensue almost immediately amongst those emotionally attached to the 'great deal'. After the bidding war the seller would have an offer 25 to 30% higher than market. The internet equivalent is $300 ebay items listed for 99 cents. Facebook fucked the IPO up by failing to generate interest through a success story, it will recover though.

Honestly, if you're 'investing' for two days you're not interested in P/E but rather technical analysis and market sentiment, both of which are poor right now, as nothing fundamental about Facebook's business has changed in the last week.

On the other hand, if they sell the stock to the public at $38 and it drops down to $34, it's someone else that's out the $4. Sure, it may create some temporary negative publicity, but, as you stated, they will recover.

If not those shareholders may also want to exit shortly after the IPO, creating a success story for the IPO should increase demand creating a better market for shareholders.

I do agree with you that in a market with rational agents and solely from the POV of Facebook, Inc. that they did the best thing, but I think in a market filled with irrational agents motivated primarily by price movements that it creates the wrong story for the next 3 to 6 months in the overall social context.

What they've created is dinner conversation about how Facebook is flopping and has provided lots of ammunition to the nay-sayers, rather than 'proving' the nay-sayers wrong.

I tend to see Facebook's business fundamentally as hype, people use it because other people use it, not because of some intrinsic thing that makes it better than any other social network. It's moat is it's userbase not it's technology.

It's like Coca-Cola, people drink Coke because other people drink coke, not because it tastes better than Pepsi. It's the fundamental reason why New Coke was a flop and Pepsi taste tests don't matter.

The attitude expressed in your comment is really disturbing.

It seems like people are investing in what other people will be willing to buy this otherwise useless stock at, and those people are only willing to do it because of yet other people willing to buy it for the same reason. Is that not correct? Seems like an extremely bizarre form of "investment", it's betting on a horse, not owning a portion of a horse.

Different situation. Pricing the IPO lower (as others have pointed out) would bring less money to facebook. And of course in the case of real estate there is no obligation to sell even if someone offers the asking price or even over the asking price.

Facebook is in for the long haul. This IPO gave them a hefty bit of cash - we probably won't see the results in full for years to come.

Basically, Morgan Stanley convinced a whole bunch of its most favored clients to buy a stock at $38 that was worth only $33 or whatever. Those are the people who got "ripped off", so to speak.

You don't understand the greenshoe: MS didn't spend a dime. That money came from selling initial shares from the "overallotment". Essentially, suckers who paid too much.

If the price had stayed above the IPO, that money would have gone to FB. Since it dropped below, MS is plowing the money (on behalf of FB) into manipulating the share price.

Edit: My more detailed explanation here - http://news.ycombinator.com/item?id=3996536

http://en.wikipedia.org/wiki/Greenshoe

Funny thing: All IPO's are priced by the sellers. If they get it right, all of them should have prices which then stay flat or decrease. It is the buyer's interest for the price to increase, a fact that seems to have been forgotten since the bubble V1.

Maybe now people will again recognize the IPO for what it is: A company begging for money.

The investors will cash out, but they'll gradually release the stock to the public.

The problem is that the sheer number of shares that need to be bought won't have enough humans in our population to buy it at the price. So you're going to see this stock gradually tank as investors dump their shares into the public.

It's really a legal ponzi scheme - Facebook only makes less than 1B in real revenue and their cap is riding at 90B and falling.

From listening to Zuckerberg I think he's a true capitalist, more interested in creating long term value than making a quick buck. I'm sure he's not excited that some very hopeful people who believed in his company are hating him right now because his stock (temporarily) seems over-priced.

Certainly, most future growth will come from extracting more cash from the pool of users (or people selling to them), not growing the pool.

The world economy has never seen anything quite like Facebook before -- that's why it's so exciting. They could become Google/Netflix/LinkedIn/Zynga combined. I'm not saying they will, but they've got the prerequisites: 1 billion active users.

Or they could become the next AOL/Myspace/Friendster/Ning combined... (IMNSHO, that's at least as likely as the former).

There is a fairly strong chance they will own an enormous % of market share of ALL online and mobile display advertising in the near future.

As Facebook figures out more ways to be a more pervasive force in people's lives, they'll have the ability to multiply the revenue they receive on a per-user basis.

They certainly can't expand the user pool by that much, which means that they need to find a way to monetize their existing users more effectively. I think that Facebook can certainly make more/user than they currently are. $5, maybe $10/user is possible. But $100? I don't think so.

So then are advertisers willing to increase their FB advertising budgets exponentially? Does FB have something coming down the pike on a regular basis to make that happen?

http://venturebeat.com/2009/03/19/the-worlds-most-lucrative-...

That doesn't sound to me like a "proven revenue model" to support a $104B company with exponential growth.

I don't, however, think it will ever live up to the price they floated at. I suspect that Facebook will be a successful company worth about a third of what they launched at.

Second, facebook stock is already priced at a level where it's expected they'll be taking in a huge percentage of total worldwide ad revenues. Where can it go up from there? There isn't much reasonable headroom there, which makes it a very poor stock to hold on to.

So their "buy" price as already set and their "sell" price was going to be set by the market anyway.

This is the only time FB can set the price. Any later sales of shares will be market priced.

Zuckerberg et. al. did pretty well out of this.

Zuck's net worth may have dropped 10% this morning (depending on how many shares he sold yesterday).

I'm talking about the money Facebook made off the IPO shares, not the net worth of Facebook employees.

> Zuck's net worth may have dropped 10% this morning (depending on how many shares he sold yesterday).

Changing the IPO price wouldn't have changed that. If they'd opened at $15 and popped up to $35, Zuckerberg's net worth would still be the same as it was when it opened at $38 and dropped to $35... but Facebook itself would've gotten much less money out of the IPO.

http://www.businessinsider.com/exclusive-mark-zuckerbergs-se...

http://www.businessinsider.com/chart-of-the-day-why-facebook...

The people on the wrong end of the deal are those that bought Facebook shares pre-IPO or in the hours after the IPO. The people on the right end are all early Facebook investors selling shares and the underwriters.

Zuck has built a valuable company - its just not $100B valuable. But a $25B company isn't peanuts.

FB scored a win by getting $100B, but in my opinion it's tainted, and they may have poisoned the well for those who follow.