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Oh, what a mess this Facebook IPO has become!

The Facebook IPO now seems so long ago, now that everyone is complaining about how it was screwed up.
The Facebook IPO now seems so long ago, now that everyone is complaining about how it was screwed up.
Spencer Platt/Getty Images

I'm resting up a bit this week and spending some quality time with what I think could be the next big social-media site, Quora. Head on over there and watch me answer some questions. And watch other Quorians do it, too.

But I do need to update everyone on the Facebook IPO mess. And it's a very big mess. You can read the Wall Street Journal's blow-by-blow here, or jump over to Business Insider and read Henry Blodget all but accuse Facebook CFO David Ebersman of violating SEC rules (which is ironic, given that Blodget himself is banned for life from the securities business for breaking the rules). At Reuters, Felix Salmon offers his own analysis — also laying much blame on Ebersman, but pointing to Morgan Stanley lead technology banker Michael Grimes as someone who botched his job.

Circumstantially, it seems what happened — apart from the computer screw-ups by NASDAQ that delayed trading on Friday — is that several of the major banks involved in the Facebook IPO, such as Morgan Stanley, Goldman Sachs and JP Morgan, cut their estimates for Facebook's second-quarter and full 2012 financial performance during the IPO "road show." They were motivated by Ebersman allegedly conveying information to them, as well as by an amended IPO filing with the SEC. 

Meanwhile, demand for Facebook stock was building, so Facebook and the banks decided to sell more — and to price the offering at the upper end of the range, choosing $38 per share. Blodget suggests that this price was well above what institutional investors, clients of the underwriters, were willing to pay — $32 — and below what uninformed retail investors might pony up: $40. 

So the stock trades early in Friday at $42 or so, hits $45 and then hangs around $40 before falling back to just above $38 by day's end — and only staying there at the close because Morgan Stanley spent millions and possibly billions to support the IPO price.

What we ended up with was a lot of selling (Facebook moved about 422 million shares on Friday) followed by a lot buying (creating all those Facebook millionaires and billionaires) followed by a lot of selling and, on Morgan Stanley's part, a LOT of buying to keep the price above $38 (to prevent the bank from looking like it blew the biggest tech IPO of all time). 

That second round of selling is where the problems are. Once Facebook got above $40, everyone who knew it might be worth only $32 could sell and pocket what little upward price movement (I hesitate to call it a "pop") there was on the stock's first day. And wouldn't you know it! Facebook, after four days of trading, is now priced at...right about $32!

It's completely unclear whether anyone did anything truly wrong here — as in go-to-jail wrong — but it does seem that Ebersman, who before the IPO looked heroic for manhandling Wall Street and running the IPO from Silicon Valley, could be "thrown to the wolves," as Michael Arrington rather bluntly puts it.

But, high above the Earth's surface and miles away from Wall Street and Silicon Valley, everything is humming along quite well for SpaceX, the other California company that's had a lot going on this past week.

Follow Matthew DeBord and the DeBord Report on Twitter. And ask Matt questions at Quora.