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I disagree. If I understand things correctly, the purpose of the IPO is to raise capital for Facebook. As such, if they sell the stock for $30/share, that's what they get. If the stock then goes up to $34/share, they don't get the extra $4. That goes to whoever bought it from Facebook and resold it. In effect, they would have raised 12% less than they could have.

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.

Kinda, I'm assuming that a portion of the IPO stock was from entities that owned the stock other than Facebook, eg. employees, early investors, etc.

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.

Mark Zuckerberg doesn't care about the Nay-Sayers. He's made it quite clear that it's his company, and he'll run it how he likes. He just got a huge wodge of money, and he can now spend it however he likes. A win all round, I'd say.

Unless it's your money he has taken. And you get no return on your investment. Why does he need that huge wodge of money?

The attitude expressed in your comment is really disturbing.

I really don't understand the investment here; it's a non-voting non-dividend share right? I've asked a few people to explain this without satisfactory answer; there is now absolutely no possible connection between the success of the company and the value of these stocks (unless Zuck decides to sell at least 7% of his 57% ownership, which seems like it will be approximately never) except that all the owners decide their stock should be priced relative to how well the company is doing and other people agree.

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.

Zuckerberg doesn't own 57% of FB (that would have made him richer than Warren Buffet), he 'only' has a majority vote.

Minority shareholders can sue if directors breach their fiduciary duty to the shareholders as a whole. It is not strict democracy.

Look up what an IPO is. It is an investment round, not a sale of personally help stock. Most shareholders are forbidden from selling during the IPO period. And in FBs case, they would have gotten better deals on secondary markets before the IPO.

"It reminds me of my realtor who would put houses on the market extremely underpriced generate huge amounts of interest."

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.

> 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.

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.

My condolence for your losses ;)