Mark presents some good points here. I like how he takes responsibility for his own trading losses and does the correct thing: he gets out when it doesn't do what he expects.

He's also correct that a company can reprice their options.

But all of that misses the point.

Later employees can have repriced options so they're no longer underwater but you have to remember that a lot of people went to Facebook in the latter days for a pre-IPO payoff that didn't eventuate. If their vesting options look little different to an RSU package they'd get from Google, there is no "golden handcuffs", which is what you really want for talent. If Facebook has to reprice their options to recreate that situation they may end up spending a lot of the cash they gained for the high IPO price.

Second, every company, every lawsuit, every war has a narrative. That narrative is important. If you're trying to get people on your side, the facts typically don't matter, the narrative does. Pre-IPO, Facebook's narrative was of going from strength to strength to the point where it had competitors scared that Facebook would be the Internet.

That is no longer the case. The spell is broken. Investors have realized this. No longer is Facebook the company with blue sky potential. It's (now) a company with a really high P/E ratio. Google, for example, peaked in 2007. Part of this was the highs of the market but part of it is also this shift from blue sky potential to viewing the company as a source of income. All this even though Google is making way more money than in 2007.

So Facebook may take years to regain the IPO price. Watch out for the pundits who see the $38 IPO price and consider $18 cheap. The first price we see for something tends to imprint strongly and we view all subsequent prices in those terms. It's a trap that could well lose a lot of people a lot of money.

Beyond employee and investor issues there is another problem here: companies tend to prefer to pay for acquisitions with stock rather than cash (eg Instagram was, at the time, $700M in stock and $300M in cash IIRC). If the narrative of your stock is one of it having consistently dropped since the IPO, it makes it harder to pay for acquisitions with stock as investors and founders have to price the stock based on expected losses rather than expected gains.

The key motivations in any market are fear and greed. If the stock has a history of going up (like Apple's in the last decade) then greed takes over and people want to get in. In Facebook's case, fear would be a significant factor now (given lock-ups of shares on acquisition, etc).

The problem with Facebook IMHO was that it waited too long to IPO. Of course as a colleague of mine likes to say, "that train has sailed" [sic].

One thing I that makes me chuckle is thinking back to the prices paid on secondary markets pre-IPO. Staunch FB defenders argued this was useful price discovery (one function of any market). Others (including me) argued that such markets were essentially echo chambers and the stock was too thinly traded to give meaningful price information. That view has turned out to be correct.

The best part of this whole story is that the wider market hasn't bought into the hype and has discounted Facebook stock accordingly. Any concern of us being in a bubble should go out the window.