Was the Facebook Deal Overhyped?

With Facebook shares trading close to their $38 offer price and revelations that retail investors got a larger-than-expected slice of the $18.4 billion IPO, market watchers are questioning whether the social network’s debut was overhyped — not just in the media, but in the investor community.

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Buy-side anticipation of a huge Day One price pop was high, and yet as of lunch time on Friday, Facebook shares hadn’t crested $45.

Experienced bankers say that with a new issue of this size, moving the shares beyond the single-digit percentage range can be tough, and that Morgan Stanley , the lead bookrunner on the deal, has done an admirable job at keeping the stock trading in relatively stable condition.

GM , for instance, which was an $18.1 billion IPO, only traded a few percentage points above its new issue price on its first day of trading late in 2010. Prior to the first day of trading, bankers said they didn’t expect a more than 10% upsurge on day one, given the deal’s size.

However, with anecdotal reports that some institutional investors got more shares than they were expecting, and new revelations that, according to two people close to the matter, the retail allocation of Facebook IPO shares was more than 20 percent, marking an all-time high for a new issue, some market participants are wondering whether the investor excitement toward the deal was overplayed earlier this week.

(Small investors are the IPO recipients “of last resort,” said one banker who was not directly involved with the deal but has experience with new issues, because they don’t carry a great deal of pricing power and may not hold the stock long term.)

But accounts of the eleventh-hour pricing process from parties close to the matter differ — in some cases starkly. Bankers canvassed investors about the possibility of pricing Facebook at $39 per share on Thursday morning, say several investors and others familiar with the matter, and some investors rebuffed the suggestion, according to some of these people, prompting a return to the $38 price that was ultimately selected.

But other people familiar with the matter say that the rebuffs were few to none, and that it was Facebook CFO David Ebersman’s call to price at a more-conservative $38 per share. The CFO felt strongly about not pricing the IPO too aggressively, say these people, wanting to feel good about the decision over the long term and knowing that more stock would likely need to be sold within the next year.

These people say also that there was always a desire to give small investors a healthy slice of the deal. Apple and other tech stocks have large retail ownership classes, one of these people added, and it makes sense for Facebook to be in line with those.

- By CNBC's Kate Kelly and Kayla Tausche@katekellycnbc and @kaylatausche