Why is Facebook Paying The Banks $100 Million for Its IPO

not just any banks. they're paying banks that will get them a high price per share. they especially want japan & china banks due to stability in this rotten economy.

Same reason people selling houses will pay 6% to a Realtor - to maximize their return.

This is the strangle hold that the i-banks have on the market. They all basically charge the same fee and that fee is the same for small deals or big deals - even though there is not much more work on the big deals.

This is how bankers get 2 million dollar bonuses - leverage. They do a small amount of work for a large piece of someone else's pie.

Now, previous posters are correct in that the better banks have better distribution networks and can guarantee a higher price, but it is still pretty nuts how much they make for how little work they actually do.

The bigger scam is the way the banks underprice the shares. For example, let's say they price the shares at $35. They know damn well that the shares are really "worth" more than that. In other words, they figure out what they think the price will be at the end of the initial frenzy and then set the opening price to be way lower. That way, the friends and customers of these investment banks that are in on the IPO can purchase shares at a low enough price that they know they will rise within hours/days of the IPO and those initial customers can cash out.

Who does this hurt? Facebook. Facebook ends up giving up X percentage of their company, for less money than they'd have received had their investment bank priced the shares higher!

standard for IPO's.

This will be the last big hyped IPO of our generation so enjoy it and take advantage of it.

Trust me, Facebook will price will above what it should, and then it will probably get a huge lift because of the expectation that is less than what its worth.

It will be an awesome game of hot potato.