Facebook IPO frenzy costs Main Street more than $600M

Ryan Cefalu, who lives with his wife and two kids in Baton Rouge, saw in Facebook’s much-anticipated initial public offering a chance to buffer his retirement fund. But as Bloomberg reports, Cefalu’s expectations fizzled along with the stock within the first minutes of trading. “It’s disheartening to know that things get over-hyped,” says Cefalu, a 34-year-old data-systems manager who spent about $4,000 on the stock. “That’s about a 12th of my annual income—so a month’s salary. I’m trying to do an on-my-own retirement kind of thing.” Facebook, a site used by 901 million people worldwide, allocated more than 25% of shares to retail investors, according to two people familiar with the offering who asked not to be identified because the process was confidential. That means the value of stock bought by that group for $38 in the IPO has dropped by at least $630 million in total, based on the closing price of $32 Wednesday—and assuming investors held onto the stock. After Facebook and its underwriters misjudged demand in pricing the IPO and glitches on the Nasdaq hampered trading on the first day, the world’s largest social-network website lost 18% in its first three days. For Cefalu, whose children are age 12 and 1, the first-day glitches meant more than a bad day of trading: they made him buy twice as many shares as he intended after an order he canceled went through hours later, he says. Read the full story here for more firsthand accounts from small investors like Cefalu who got swept up in the Facebook IPO frenzy and are now wondering if they were swindled.