Facebook Debut an Epic Fail; Underwriters had to Rush to Keep it Above IPO Price

Now this is embarrassing for a "historic IPO" and the greatest of all time and other hyperbole that was used by CNBC to hype Facebook.

But the shares lost steam in the final hour of trading, and fell back to the $38 level—a tepid performance for one of the largest and most closely watched IPOs. More than 30 banks were involved in the offering, which sold at least 421 million shares to investors.

There was supposed to be a rush to keep the stock above the IPO price of $38 which would have been a serious embarrassment for the underwriters and Facebook as well. Also I hope this guy was able to get in at $38 and not $45 because he swallowed that CNBC hype uncooked:

"If it wasn't for Facebook I wouldn't be here," he said as he left the branch to go to his bank and transfer money into his new account. "I missed out on Groupon when it went public, so I'm not going to miss the boat this time."

Mr. Hodges said he plans to invest $10,000 in Facebook shares—including $4,500 of his own money and $5,500 from his mother.

Mr. Hodges expressed confidence in Mark Zuckerberg as Facebook's CEO and said he isn't worried about Mr. Zuckerberg being young. "To me, he's a genius. You know, he created something for the whole world... Everything is social now. The world is a different place with Facebook," he said.

Um, Mr. Hodges has no business investing his or his mom's money because he just isn't very good at it. If he bought Groupon at the IPO price of $20 he would be down $8.42 a share on paper. In other words he would have lost nearly half of his initial investment. Or maybe to put it in a positive light he "missed the boat" on losing $8.42 a share which is a pretty good deal I think. In any case he is not the kind of retail investor that WSJ should be interviewing.

I'm not saying that Facebook will drop too far below $38 since I think the underwriters will prop it up as much as they can to not look like fools to have priced the stock too high. Facebook just isn't worth half of Google's market cap but trades at 45 times earnings while Google trades at only 12 times earnings. Google is growing their earnings at a 60% clip.

Facebook is basically trading on the hope that Zuckerberg can keep Facebook growing its earnings +50% a year for quite a while. I mean the stock is worth 1/5th of Apple and doesn't come close to growing their revenue at anywhere near the 94% that Apple currently is. I think Facebook should have priced a smaller allotment than 18% of float at $30 and they would have had lots of room to grow higher. Right now they are priced for even more than perfection. I just don't see how they can do it by only selling banner ads.