Now, if Morgan Stanley had been handling Rufus' house, it might have gotten the full $160,000. It might have gotten $200,000, and that seller might have had to wait years for a gain. (The house is now worth well over $200,000, by the way.) That's basically what Facebook got from Morgan Stanley. It got a full price for the shares it was selling. It got $10 billion in cash with which to build the business. I'm supposed to think this is a bad thing. Google ( GOOG) did something like this when it went public in 2004. HowStuffWorks has a nice explanation of the "Dutch auction" process the company used to try and maximize its value and give everyone a shot at some shares. Google stated how many shares it would offer, then took electronic bids. (Morgan Stanley was one of the underwriters.) The result was a sale at $85/share. Google is now over $900.
What the speculators wanted was to get in cheap and get a "pop" on the stock on the day of the offering, for a quick profit. This is what all those cool Internet stocks did when Hambrecht & Quist was taking them public in the 1990s. H&Q itself sold out at the peak of the Internet bubble to JPMorgan Chase ( JPM), for $1.35 billion, Wikipedia recalls. Founder Bill Hambrecht went on to patent a Dutch auction method called OpenIPO. I really wish Bill Hambrecht had sold my friend Rufus' house back in the day. Or that Morgan Stanley had. So some speculators got fleeced on Facebook. Big deal. I'll just call it Rufus' revenge. At the time of publication, the author was long GOOG. Follow @DanaBlankenhorn This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.