[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.