Insight: who got facebook shares? fairness may not come into it - Titanium Heat Exchanger Tube Manu

That is approximately half a sharefor each of its 900 million active monthly users. Demand for the long-awaited deal, meanwhile, has been surging,helped by wall-to-wall media coverage. Orders for Facebook sharesoutweigh the supply by a ratio of more than 20 to 1, according totraders' estimates. Aside from wanting the cachet of owning the next big thing,investors are eager to buy something that may deliver big, evenastronomical returns -- a rare opportunity in today's low-yield andturbulent markets. IPOs often offer an early pop, even if theshares stumble later, and Facebook is seen initially climbingfurther than most.

Some analysts expect Facebook shares to rise by as much as 50percent, or even more on the first day. Facebook and underwriters, as usual, kept mum about overall demandahead of the IPO. Facebook, which will trade under the ticker FB,did not return calls for comment. There have been growing expectations in the market that smallinvestors, as opposed to big pension and mutual fund managers, willget as much as 30 percent of the deal.

That's a bigger chunk thanthe 10 percent to 15 percent that is typically allocated to retailinvestors. It is a result of efforts by Facebook executives to makeshares available to more users. Underwriters are accommodating Facebook's wishes. But theallocation may still not be nearly enough to meet demand.

That puts financial advisers and brokerage houses in theuncomfortable position of not having enough shares to satisfy MainStreet investors clamoring to be a part of the hottest IPO sinceGoogle's 2004 debut. One of those investors is Mary Furlong, who runs a marketing firmfor baby boomers in Lafayette, California. "I want to buy shares. Imissed the Google opening," she says, but did not end up gettinghold of any shares. Google, whose founders made "Don't be evil" a core principle, in2004 issued its stock through a more transparent process known as amodified Dutch auction.

Underwriters gathered bids from investorsregardless of their connections or size of their portfolios. That created more of a level playing field for potential investors.Google's shares were priced at $85, climbed to $100 on Day 1 andare now trading at about $623. Facebook is selling its shares through a traditional Wall StreetIPO, a more subjective process, one managed by investment bankers. "The deal is probably not 'fair,' but there's no way it can be,"said Bruce Foerster, owner of South Beach Capital Markets andformer head of global equity syndicate at Lehman Brothers.

"If youdon't have ties to Facebook management, if you don't have accountsand an investment history with firms that are co-managing the deal,why should you get any stock?" MANAGING EXPECTATIONS The demand for Facebook shares has put immense pressure on the17,000-plus financial advisers at Morgan Stanley Smith Barney, thebrokerage unit of Morgan Stanley, one of the IPO's leadunderwriters. On Monday the company told advisers that its retail customers wouldbe limited to a maximum 500 shares per account, only to increasethe limit to 5,000 on Thursday, according to sources familiar withthe situation. Mindful that customers would be frustrated, Morgan Stanley early ondistributed a script to its brokers on how to handle requests fromclients, said one veteran broker. "The minute someone says 'Facebook,' we're supposed to say, 'Yes,we're the lead, but we can't talk about it,'" the broker said.

"Iheard from three or four clients, and I told them there is no wayI'll be able to get them shares because I haven't done IPO businessin years." Other brokerages are in the same boat. Bank of America's MerrillLynch brokerage is limiting retail clients to a maximum 2,000shares per account, according to brokers at the firm. Wells Fargo Advisors, the brokerage arm of Wells Fargo & Co,has a scoring system for allocating shares among its more than15,000 brokers. It weighs brokers' annual revenue production, howmuch IPO work they do and how long their clients held positions inprior IPOs, according to one Wells Fargo broker.

Then in turn, brokers score their clients based on assets with thefirm, how much they have traded in the past, and how long they'veheld onto previous allocations of shares in IPOs. "I can't just get Facebook shares for my buddy," said one WellsFargo adviser, who declined to be named because he is not permittedto speak to the press. At Fidelity, the funds and brokerage giant, Facebook shares will bereserved only for clients with at least $500,000 in assets,excluding 401(k) plans, or those who make at least 36 trades a yearwith the firm, according to Fidelity spokesman Stephen Austin. Loyalty helps: Fidelity customers who have being doing businesswith the firm for the longest periods get higher priority in theIPO food chain.

While excluded investors may feel spurned, there's nothing illegalabout banks selling shares to their best customers. Whether it isfair to everyone is another question. "People have argued that it leaves other investors out, especiallyfor hot IPOs, where in the after-market the prices are likely to bemuch higher," said Jill Fisch, a professor at the University ofPennsylvania Law School. Maurice Costello, a former broker who works as an accountant in theBoston area, says he has ordered Facebook at $37 a share throughhis E*Trade account. But he has no idea how many shares he mightultimately receive.

The online brokerage, which typically caters to small investors, isone of 33 firms named by Facebook to distribute its newly issuedshares. E*Trade would not comment on the Facebook IPO. For some investors, buying into the IPO doesn't necessarily meanholding on to the stock. Richard Laermer, who is CEO of socialnetwork ThankBank, is clamoring to get Facebook shares and flip, orsell them, at a profit.

"I am going to do what I did with LinkedIn, Groupon, Google,Research In Motion, AOL, Netscape, Dunkin Donuts ... plus a host of90s stocks that I can't even recall," Laermer wrote in an email toReuters. "Buy on Day One, sell on Day Three. It never fails." (Additional reporting Alistair Barr, Olivia Oran, Jessica Toonkel,John McCrank and Jennifer Cummings; Editing by Jilian Mincer,Martin Howell and Steve Orlofsky).

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