I’m happy to say I was wrong (and Felix was right) in guessing that retail investors would jump into Facebook shares and push it significantly higher. The stock stayed even on Friday only with the massive support of its underwriters, and it plunged 11 percent today.

What happened? The company was overpriced, as many press stories suggested, and Facebook and its bankers unloaded too many shares all at once, The Wall Street Journal reports:

The greater issue, they said, was that the company and its bankers overestimated demand. In particular they pointed to a decision disclosed Wednesday to raise the potential pool of shares to be sold to 484.4 million shares from 388 million.

With that shift, many investors received far more shares than they had expected, said people familiar with the matter. That is unusual for an IPO, and it spooked investors…

t $34, Facebook would have a price-to-earnings ratio, a measure of how expensive or cheap a stock is, of about 57 times projected earnings for the next 12 months, according to FactSet research. That’s still a much richer valuation than other tech titans, such as Google, at 14. Those ratios mean a Facebook share is more than four times as expensive as a share of Google.

Facebook is worth “just” $73 billion tonight, but that is still awfully high for a company with declining earnings that made just a billion dollars last year and whose revenue growth, while still fast, is slowing.

— TechCrunch’s Alexander Haislip writes that “Silicon Valley Can Do Better Than Facebook.”

Facebook isn’t bad. It is just a low-value use of time that doesn’t contribute much to the economy beyond enriching the rich. What more valuable things could be done with the time, energy, effort, creativity and capital invested in its making and daily usage?

There are startups doing amazing things here in Silicon Valley still. Sure there are the electric cars, robot butlers, space rockets and a bunch of hyper-ambitious projects. But you can have a positive contribution to the economy and the world without curing cancer or feeding starving people in Africa (there is a venture firm in San Francisco working on sustainable agriculture if you do want to make a difference in the subcontinent). I’m often impressed by people working to prevent outbreaks of nasty viruses with rapid vaccination development or others creating systems to radically improve the energy efficiency of large buildings. These companies’ goals are obtainable, their achievement would be beneficial and the products would be the world’s envy.

With Facebook public, perhaps the past half-decade of social networking, casual games, virtual worlds, MMORPGs, app stores, avatars and “pokes” will give way to a renaissance of startup companies that make real products of tangible value that employ regular people. Such a return to Silicon Valley’s roots could reinvigorate the American economy and once again put this unique place at the heart of human progress.

I’m not sure I’d go all utilitarian on Facebook, but it’s good to point out that despite the utopian rhetoric, this is basically an entertainment company trying to get you to click ads about the gout.

— And speaking of Felix, don’t miss this post he wrote last month deflating the Marc Andreessen bubble a bit—and pushing back on a silly <i>Wired cover deeming the Facebook investor “The Man Who Makes the Future”:

But Andreessen has never really been a public intellectual. His single greatest achievement — the creation of the world’s first web browser, Mosaic — took place under the auspices of the National Center for Supercomputing Applications at the University of Illinois. But ever since then he’s been a red-blooded capitalist, founding and funding a long series of for-profit companies, and becoming one of the wealthiest and most powerful men in Silicon Valley in the process.

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