[tomp]

Personally, I think that Mark made a great move with the IPO. It's really silly to have an IPO at price $x, when it's well-known that the price will jump to $y > $x on the first day of trading. It's basically a reward for the elite, for the investors that have enough capital to be approached by the underwriting investment banks. It's money that most companies leave on the table, but Mark played it optimally.

[jegutman]

Huge mix of incentives here. I agree with you from a financial perspective, but it's just more complicated (for all kinds of dumb reasons).

A) Publicity. Do you want good headlines or bad headlines from the IPO?

B) Secondary sales: It's kind of silly, but if / when you go to sell more shares the people who have made money are more likely to buy (against all logic) because some of them think of the money they made as a cushion against losses.

C) Banks want to please their customers. Think of this as part of the fee for the IPO. Typical underwriting fees are 7%, but they could be 10%, all arbitrary, but they basically charge some extra points that they choose to give to their clients in the form of IPO allocation for continued business.

D) Those same banks in (C) might be the people who help the executives moves large blocks of stock in the future (not easy to sell 10 million shares of a company without having large price impact). Executives in particular want a good relationship with their underwriters and if they're too aggressive on price they might not get it.

Agreed that none of these are super compelling, especially for a very long-term owner like Zuckerberg.

[tomp]

A) Facebook doesn't need publicity.

B) Sure, but you want to encourage long-term investors, not short-term traders.

C) Sure, but how does Facebook benefit from that?

D) I'm pretty sure there's enough competition in the market that a single bank rejecting the block trade won't impact the final execution price too much.

[fweespeech]

It stills screws everyone who is dumb enough to buy at the IPO price and the general public who is dumb enough to believe its real. They paid the Aug 2013 price to get Facebook in 2012.

[tomp]

Except the long-term investors.

In any case, the predicted price before the IPO was exactly the IPO price. That's fair. If your view was that FB has a lot to grow and the IPO price is too low, you would buy it. If not, you wouldn't. Back then, nobody knew its price is first going down a lot, and then up even more.