Facebook's public debut had plenty of buzz but not much pop. The shares opened 11% higher, but soon struggled to stay above their offering price. David Benoit and Shayndi Raice have details on The News Hub. Photo: Reuters. 
 
 Facebook Inc. took eight years to stage one of the most anticipated initial public offerings ever. The anticlimax came Friday, as Wall Street bankers struggled to prevent the newly minted stock from ending its first day with a loss. 
 
 The stock had been widely predicted to soar on its first day. Instead, up until the closing moments of the trading session, Facebook's underwriters battled to keep the stock from slipping below its offering price of $38 a share. Such a stumble would have been a significant embarrassment, particularly for a prominent new issue like Facebook, the most heavily traded IPO of all time. 
 
 In the end, the bankers succeeded. When trading on Nasdaq ended at 4 p.m., the social network's stock was up just a hair, 0.6%, at $38.23. 
 
 The roller-coaster day—Facebook's shares started out jumping roughly 11%, before cooling off—was also beset by trading glitches and a 30-minute delay in the opening of trading. Nasdaq OMX Group Inc. didn't respond to requests for comment. 
 
 Facebook was also hurt by investors' high expectations of a healthy first-day pop in the price, according to people familiar with the matter. When that pop didn't happen, it prompted a selloff, these people said. 
 
 That's when Facebook's underwriters had to step in to support the company's share price, people familiar with the matter said. In particular, lead underwriter Morgan Stanley was assigned to be the deal's "stabilization agent"—meaning it was the firm's job to keep the shares above the offering price, these people said. In that role, Morgan Stanley was forced to buy Facebook shares as the price slid toward $38 in order to prevent the price from crossing into negative territory, according to these people. 
 
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 Morgan Stanley, which led the platoon of 11 Wall Street banks that arranged the listing, had to dip into an emergency reserve of around 63 million Facebook shares—worth more than $2.3 billion at the offer price—to boost the price and create a floor around $38 a share, according to people close to the situation. In successful IPOs, the reserve, known as the "overallotment" or "green shoe," is used by underwriters to meet soaring demand but in this case, it was used to prop up Facebook's ailing share price. 
 
 The process is common in IPOs and works like this: The underwriters have the extra shares available to either sell or buy for a period after the IPO. If demand is strong, they sell them like all the other shares. But if the stock price falls, they can buy them back, effectively creating a floor for the price. 
 
 Facebook's price began falling almost immediately after shares began trading. It is unclear exactly when Morgan Stanley stepped in, but traders said that the price movements throughout the day, with the shares occasionally touching the IPO price but never crossing below it, suggested the firm was active throughout much of the session. 
 
 Facebook's opening-day travails suggested how tough it can be to live up to high expectations in the market. "There's been way, way too much hype, so it may be impossible not to have it be anticlimactic," said Peter Falvey, managing director of the Boston-based investment bank Falvey Partners LLC. 
 
 Photos: Facebook's First Day of Trading View Slideshow 
 
 The stock's 0.6% rise was far below the first-day performance of other companies that raised $5 billion or more in their IPOs, such as United Parcel Service Inc., which experienced a 36% first-day pop in 1999, according to Dealogic. Some Web-company IPOs over the past year, such as the social network LinkedIn Corp., more than doubled on their first days, though game maker Zynga Inc. closed down 5% on its December debut. 
 
 Still, at a market capitalization of nearly $105 billion by day's end, Facebook took its place among the nation's corporate giants. Its stock market capitalization makes Facebook bigger than computer firm Hewlett-Packard Co., and puts it in the same league as PepsiCo Inc. 
 
 At Facebook's headquarters in Menlo Park, Calif., the mood was celebratory, according to people on the company's campus. Chief Executive Mark Zuckerberg, who founded the company from his Harvard dorm room in 2004 and who is now worth $19.25 billion, rang the Nasdaq opening bell from there early Friday morning amid a gathering of around 2,000 employees. 
 
 Related Video 
 
 Facebook CEO Mark Zuckerberg addresses employees before ringing the Nasdaq bell ahead of Facebook's IPO on Friday. Video: Facebook. 
 
 Mean Street host Evan Newmark calls on WSJ's Thorold Barker and Rolfe Winkler to discuss the delay and then relatively slow start by Facebook shares following the start of trading. Photo: Getty Images. 
 
 In his On the Mark segment, Mean Street host Evan Newmark points out that Facebook's slow start out of the IPO gate gives him lots of hope. Photo: AP. 
 
 WSJ's 'Intelligent Investor' Jason Zweig visits Mean Street and looks at the unique way in which Facebook is intertwined with the lives of its customers and asks 'How much is too much to pay for a piece of yourself?' Photo: Getty Images. 
 
 Flanked by Chief Operating Officer Sheryl Sandberg, Mr. Zuckerberg told the crowd to remember the IPO was just one day. "Going public is an important milestone," said the 28 year old, sporting his trademark hoodie. "But here's the thing. Our mission isn't to be a public company. Our mission is to make the world more open and connected." He closed with, "Stay focused and keep shipping." 
 
 The social network last month reported that its first-quarter sales declined from the prior quarter, and that profit also slumped, though revenue was up from a year earlier. Advertisers such as General Motors Co. have publicly questioned the utility of Facebook's ads. And Facebook must grapple with privacy issues as well as concerns over its strategy in mobile devices and the complex China market, among other things. 
 
 "Facebook's got a great run ahead of it, but things keep moving," said Deepak Kamra, a general partner at venture-capital firm Canaan Partners. "Platforms come and go." 
 
 For the day, however, the offering drew in investors large and small. Theophilus Hodges, a 36-year-old property manager, stopped into an E*Trade branch in downtown Chicago Friday morning specifically to open an account to buy Facebook shares. Mr. Hodges said he plans to invest $10,000 in Facebook shares, using $4,500 of his own money and $5,500 from his mother. "If it wasn't for Facebook, I wouldn't be here," he said. 
 
 Some investors who had bought Facebook shares in private transactions in the so-called secondary market before the IPO said they were disappointed the social network didn't have a strong first-day pop. "If the stock were trading in the $50s right now, I might be fighting off some momentary giddiness, but I can't take giddiness to the bank," said Kevin Landis of the $85 million technology fund Firsthand Capital in San Jose, Calif., which bought Facebook at about $31 a share on the secondary market. 
 
 Yet even if some institutional investors felt let down, Facebook's early venture-capital investors were jazzed. David Sze, a venture capitalist at Greylock Partners, which invested about $12 million in Facebook in 2006 at a $525 million valuation, faced criticism at the time for what was viewed as an expensive deal. Greylock now owns a stake in Facebook valued at as much as $1.15 billion. "No one ever believes at the beginning," Mr. Sze said, adding that his partners are "feeling very happy." 
 
 The hours leading up the IPO on Friday morning were busy at Facebook. Late into Thursday night, hundreds of employees huddled around their computer screens and goofed off, playing hockey or giving impromptu concerts. 
 
 At around 6:30 a.m. Pacific Time on Friday, hundreds more employees returned to the campus to watch Mr. Zuckerberg ring in Nasdaq's opening bell. Facebook engineers had rigged the button to automatically post the message, "Mark Zuckerberg has listed a company on NASDAQ - FB," on his own Facebook profile as he rang the bell. 
 
 But on the other side of the country, on Wall Street, traders were exasperated by a 30-minute delay in the opening of the stock, which didn't begin trading till around 11:30 a.m. Eastern. Nasdaq officials told members in a notice at noon that its staff was "investigating an issue in delivering trade execution messages" from trades made in Facebook's IPO. Around 1 p.m., Nasdaq indicated it would provide a "manual report" to brokers with information on Facebook trades. 
 
 Once the stock opened, trading was robust. More than 200 million shares changed hands in the first hour, as investors rushed in to buy, and some who had received stock from the IPO cashed out. By day's end, 571 million shares traded hands. 
 
 The glitches that beset Nasdaq on Friday helped contribute to the lackluster price for Facebook shares, according to people familiar with the snafus. One of the biggest problems, these people said, was that buyers and sellers of Facebook shares weren't provided confirmation of their trades until 2 p.m. That's akin to people not knowing how much money is in their bank account, and therefore not knowing whether to go out and spend more money or save. 
 
 Lead underwriter Morgan Stanley received about 38% of the IPO shares to distribute, while J.P. Morgan got 20% and Goldman Sachs Group Inc.'s allotment was roughly 15%. Morgan Stanley is expected to command the largest percentage of more than $175 million in fees from the IPO. 
 
 —John Letzing, Owen Fletcher, Geoffrey A. Fowler and Jenny Strasburg contributed to this article. 
 
 Write to Shayndi Raice at shayndi.raice@wsj.com, Ryan Dezember at ryan.dezember@dowjones.com and Jacob Bunge at jacob.bunge@dowjones.com ||||| Stock Chart for Facebook Inc (FB) 
 
 Let the Facebook Inc. (FB) finger-pointing begin. 
 
 After one of the most anticipated initial public offerings in history, Facebook’s 19 percent drop this week prompted investors to fault everything from Morgan Stanley’s role as lead underwriter, to the company’s greed and the Nasdaq Stock Market. 
 
 “It was like the gang that couldn’t shoot straight,” said Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston. He said he placed Facebook orders for clients. “The underwriters mis-estimated what actual demand was, and there was pure execution failure coming out of the Nasdaq.” 
 
 Taking the most heat is Morgan Stanley, said Mullaney. The bank was lead underwriter among the 33 firms Facebook hired to manage the $16 billion sale of stock. The bank decided with Facebook executives to boost the size and price days before the May 17 IPO, ignoring advice from some co-managers, said people with knowledge of the matter, who declined to be identified because the process was private. Morgan Stanley talked with few of its fellow underwriters aside from JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. throughout the IPO, one person said. 
 
 “They overplayed the enthusiasm and probably just misread the atmosphere of the marketplace,” said Keith Wirtz, who oversees $15 billion as chief investment officer at Fifth Third Asset Management in Cincinnati and bought some stock in the IPO. 
 
 Blame Game 
 
 Facebook increased the number of shares being sold in the IPO by 25 percent last week to 421.2 million and raised its asking price to a range of $34 to $38 from $28 to $35. Had Facebook kept the original terms, investors may have had a better shot at a first-day pop. Instead, the stock was little changed in its debut because Morgan Stanley intervened to prevent it from falling below the IPO price. 
 
 The shares fell 8.9 percent to $31 at the close today, after an 11 percent drop yesterday. 
 
 Just days before Facebook raised the size and price of its IPO, the company began telling analysts to lower their sales forecasts, people familiar with the matter said. Morgan Stanley (MS) analysts were among those who cut their projections during the roadshow, said one person. The move also followed a May 9 filing in which Facebook said advertising growth hasn’t kept pace with the increase in users. 
 
 Investors Misled? 
 
 Some investors say they felt misled by the underwriters. According to one London-based fund manager who asked not to be named, bankers indicated demand was so strong that he placed a bigger order than he thought he would get, leaving him with 40 percent more Facebook shares than anticipated. He sold most of that stock on the first day of trading. 
 
 The decision to boost the price range reflected the demand in the market, said a person involved in the process. Michael DuVally, a spokesman for Goldman Sachs, and Pen Pendleton, a spokesman for Morgan Stanley, declined to comment. Jennifer Zuccarelli, a spokeswoman for JPMorgan, declined to comment. Underwriters didn’t say how great demand was. 
 
 Morgan Stanley and Facebook consider problems with Nasdaq OMX Group Inc.’s computer systems among the reasons for the IPO’s performance so far, according to people familiar with the matter. Nasdaq’s trading platform was overwhelmed by order cancellations and updates that made the stock-market operator unable to finish the auction required to open trading. The U.S. Securities and Exchange Commission said it will review the trading. 
 
 Nasdaq Software 
 
 Nasdaq Chief Executive Officer Robert Greifeld said on a call with reporters on May 20 about the glitch that the opening delay “had no apparent impact on the stock price,” noting the share decline began after all brokers had received confirmation about their trades in the opening auction. Robert Madden, a spokesman for Nasdaq OMX, declined to comment beyond Greifeld’s statement. 
 
 Nasdaq said in a notice yesterday it delivered all outstanding execution and cancellation messages to brokers for their IPO cross orders at 1:50 p.m. Facebook declined 5.9 percent after 1:50 p.m. 
 
 Facebook CEO Mark Zuckerberg and the early backers should be held accountable for the stock drop, said Francis Gaskins, president of researcher IPOdesktop.com in Marina Del Rey, California. Goldman Sachs, Accel Partners, Digital Sky Technologies and other existing holders boosted the number of IPO shares they offered in Facebook on May 16, a day after the company increased its price range. 
 
 ‘Mispriced’ Market Value 
 
 “It’s a combination of Zuckerberg’s ego for that $100 billion market cap, and the shareholders selling who wanted an exit,” said Gaskins. “Somehow it just missed them that this was mispriced.” 
 
 Larry Yu, a spokesman for Menlo Park, California-based Facebook, declined to comment. Rich Wong, a partner at Palo Alto-based Accel Partners, and Yuri Milner, founder of Digital Sky Technologies in Moscow, didn’t respond to requests for comment. 
 
 Facebook Chief Financial Officer David Ebersman was the point person on the deal, while Zuckerberg and Chief Operating Officer Sheryl Sandberg weighed in on major decisions throughout the process, people said. At Morgan Stanley, Dan Simkowitz, chairman of global capital markets, was one of the main bankers on the offering. Michael Grimes, global co-head of technology investment banking at Morgan Stanley, also played a key role. 
 
 Underwriters did accomplish part of what they set out to do: turn paper into cash for pre-IPO holders. 
 
 “It was successful for the liquidating owners, absolutely, because they got all that and then some,” said Peter Sorrentino, a fund manager who helps oversee $14.7 billion at Huntington Asset Advisors in Cincinnati. 
 
 For the investors it was a different story. 
 
 “I shame the people who were lining up to buy the thing,” said Sorrentino, whose firm didn’t buy stock in the IPO and tried to talk clients out of purchases. “The financials were there, do the math. Everyone wanted to be caught up in the glamour offering of the year. People just had stars in their eyes.” 
 
 To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net; Lee Spears in New York at lspears3@bloomberg.net Joseph Ciolli in New York at jciolli@bloomberg.net 
 
 To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net ||||| Facebook shares reached a record low for the third consecutive trading session Monday, falling lower than half the price commanded in the company’s record-breaking initial public offering before rallying to higher than $20. 
 
 The world’s most popular social network began its most recent descent Thursday, when millions of shares belonging to early investors and insiders became available for trades as the first post-IPO lockup expired. Shares continued to slide Friday, briefly hitting $19 in intraday trading, half the $38 IPO price just three months after the company’s public debut. 
 
 Monday morning, shares dipped lower than $19 for the first time, touching as low as $18.75; the stock rebounded, however, closing at $20.01, a 5 percent daily increase. 
 
 Facebook went public after a highly anticipated IPO on May 18, selling shares at $38 apiece and establishing a record for valuation at IPO time of $104 billion. Problems started immediately, however, as the first day of trading was bungled by Nasdaq, confusing investors who did not know if requested trades had been processed. 
 
 The stock closed barely higher than the IPO price on the first day of trading, with reports that Facebook’s underwriting banks, led by Morgan Stanley, had bought shares in bulk to maintain that price. 
 
 Shares fell lower than the IPO price on the second day of trading and have never returned, as reports appeared showing that pre-IPO revenue projections had been downgraded, a fact that was shared with large institutional investors but not the public at large. 
 
 Since the IPO, investors have been shaken by reports of Facebook’s slowing growth rate and by uncertainty over whether major advertisers are willing to commit their budgets to a still-evolving ad platform. 
 
 Last week’s expired lockup added 271.1 million shares to the initial offering of 421 million shares, increasing Facebook’s “float” by more than 64 percent. 
 
 Certain early investors and executives were handed control of their shares to trade, including famed investor Peter Thiel, Goldman Sachs, Chief Operating Officer Sheryl Sandberg and Chief Financial Officer David Ebersman. 
 
 However, few were expected to sell shares with the price so low; Microsoft, an early Facebook partner that owns more than 26 millions shares of stock, said last week it would probably not divest any stock, for instance. 
 
 The stock could face more pressure in the months to come. Facebook is expected to report earnings for the current quarter in October, just weeks before the biggest batch of insider shares become eligible for sale. A large group of mostly Facebook employees will be free to sell 1.2 billion shares as of Nov. 14. 
 
 Analysts seemingly still believe in the stock: Of 38 experts tracked by MarketWatch, only two believe investors should sell their shares, with 15 rating the stock a “Hold” and 18 rating it a “Buy.” The average price target — the price at which an analyst believes an investor should sell shares for the greatest return — is $35.30. 
 
 Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.
– Facebook has seen a mixed start to its IPO: Initially priced at $38 each, shares in the company quickly jumped about 11%, opening at $42. But things cooled off, and at one point in the first half-hour, shares were back down to about $38, notes the Wall Street Journal. They were hovering just under $40 around mid-day. “I think it’s surprising that they didn’t get the pop that many were expecting,” one analyst tells MarketWatch. “It seems the underwriters did not leave much upside, or perhaps investors were signaling that they would buy a lot more shares than they ended up actually buying.” TheStreet.com has a liveblog here.