Which insiders care about the current price of Facebook stock and had power to pick the IPO price?
Zuckerberg et al are independently wealth if Omega appears tomorrow and crashes Facebook.
The investment bankers organizing the IPO have made the money that they were going to make on the transaction.
Lower level insiders might care about the current share price and have the insight that anchoring the price would provide support - but did they have power over the IPO price?
More generally, there's no reason but ego for Zuckerberg to want the share price to climb from the IPO price. As explained here, first day increase over the IPO is really collected by the investment bankers, not the business creators.
In other words, there is a satisfactory explanation for why the IPO price was high compared to the general trend of share price. Do you feel that explanation is insufficient for the observed behavior?
Maybe I'm being slow: I don't understand what explanation you refer to. You give arguments for why each of the groups involved in the IPO either had no motive, or no power, to over-price the stock; but I don't see where you give an alternate explanation. I suspect an underestimated inferential distance; can you clarify?
Facebook IPO'd at a price of 38 dollars a share, which apparently gave it a price-to-earnings ratio in the range of 100 - extremely, fantastically high. The price dropped pretty rapidly and is currently somewhere around 20 dollars; which still, presumably, gives it a very high P/E ratio somewhere in the forties. Now, suppose it had IPO'd at a more historically-reasonable P/E of, say, 20 - still high, but not stratospheric. That would put the initial share price somewhere around 10 or 12 dollars. Is there any strong reason to believe that the price would then have *risen* to where it is now? It is not obvious to me that the current price is supported by anything but the historical price - in other words, it's trading around 20 because it has recently traded around 25.
My point: I can't help but wonder if someone connected to the IPO had read Kahneman on anchoring. Somebody, clearly, was buying the stock at 33, just as someone is still buying at 20; I wonder if the chain of thought had that apparently-arbitrary number "38" in it somewhere, making 33 look cheap - fundamentals be damned! And if this happened, who benefited, and what ought we to conclude about the efficiency of markets?