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Facebook shares fell 11% on Monday, after Morgan Stanley and other Wall Street banks ceased to prop up the social network's stock atFriday's $38 offering price. Although the IPO was a bigsuccess for Facebook and its early investors and insiders whosold $9 billion worth of shares that they had acquired at lowerprices the offering was a disappointment for many investors whoclambered to get a piece of the most hyped IPO in nearly a decade.The IPO also revealed significant problems at Nasdaq, turning whatshould have been a triumphant offering into an embarrassingdebacle. Here are four takeaways from Facebook's rocky publicdebut. 1. Facebook's bankers, led by Morgan Stanley, priced theoffering too high. Last week, in the hype-fueled run-up to Facebook's IPO,there were numerous reports about the intense demand for a slice ofthe social network. The IPO was oversubscribed, we were told,causing Facebook and its underwriters, led by Morgan Stanley, toraise the offering price from a low of $28 to $38 per share andalso increase the number of shares sold. Many pundits including financial analysts and journalists predicted a large first-day pop, fueled by investor demand forone of the hottest offerings in years. (I predicted a $46 closingprice, which was relatively conservative but still too high.) ( VIDEO: The Facebook IPO: Explainer ) It may be part of an underwriter's responsibility to support an IPO at the offering price, but the fact that MorganStanley and its partners were forced to wage such an epic battle todo so in the final hour of trading on Friday indicates a pricingfailure. Simply put, the artificial demand distorted the market until Monday, when the shares tumbled 11%. With Morgan'sStanley backstop gone, the market priced Facebook at a moreauthentic level, $34, or about $10 billion less by marketcapitalization than the offering price. "The underwriterscompletely screwed this up," Wedbush analyst Michael Pachter told the Wall Street Journal . The offering "should have been half as big as it was, andit would have closed at $45." 2. Facebook's fundamental financial metrics still don'tsupport its current valuation. If Facebook was overvalued at $104 billion, it's stillovervalued at $93 billion. Even after Monday's sell-off,Facebook investors are still betting on the hope of steep revenueand earnings growth over the next few years. With $1 billion inprofit last year, Facebook has an extremely high price-to-earningsratio of 93 to 1. Even if you stipulate strong earnings growth, thecompany's forward-looking PE ratio is at least 40 t0 1, byformer Wall Street analyst Henry Blodget's most "aggressive" scenario . That makes Facebook much more expensive, on a forward-looking(2013) basis, than tech juggernauts like Apple (10 to 1) and Google (12 t0 1). Is it any wonder that Apple sharesclimbed nearly 6% on Monday, as investors chose its relative safetyover Facebook? (Google shares climbed 2.3%). ( MORE: Facebook IPO: After the Hype, Investors Are Betting on Hope ) Meanwhile, Facebook's revenue growth is actuallydecelerating, and knotty questions remain about the company's advertising business. Given thefact that Facebook CEO Mark Zuckerberg has made clear that heprioritizes the company's idealistic social mission overprofits, investors should be very wary of buying the stock, even atthese reduced levels. Should Facebook's stock price be evenlower than $34 right now? We may have to wait a few quarters to geta better sense of the company's revenue and earnings growth,in order to find out where this stock should be priced. 3. Nasdaq can't be relied on to conduct the biggest IPOs. Nasdaq had lobbied aggressively to win the Facebook offering overits rival NYSE Euronext, but when the big day came, its systemsperformed poorly. Trading was delayed for 30 minutes on Fridaybecause the exchange had trouble matching buy and sell orders.Trades for millions of shares were never confirmed, and sometraders didn't receive trade confirmation for hours somenot even until Monday morning. These snafus may have caused someinvestors to not trade any further, hurting the stock'sfirst-day performance. One trading executive called it "arguably the worst performance by an exchange on an IPOever." One thing's for sure: Nasdaq suffered a serious black eye atwhat should have been one of its proudest moments, as home to themost anticipated IPO in nearly a decade. "This was not ourfinest hour," Robert Greifeld, chief executive of Nasdaq OMXGroup, told reporters on Sunday. He blamed "poor design" in theexchange's trading software which is particularly ironic,given the exchange's reputation as the preferred home of techcompanies. Greifeld said the exchange was "humblyembarrassed." The Securities and Exchange Commission isinvestigating the problems at Nasdaq, and its report, when issued,will no doubt lead to another round of hand wringing about theexchange's poor performance. ( MORE: With IPO Looming, Is Facebook s Ad Business Ready for Prime Time? ) 4. Ordinary individual investors should stay away from heavilyhyped IPOs like Facebook. It's a sad testimony on the state of our capital marketsthat the public is best advised to stay away from the mostanticipated initial public offerings. The whole point of suchofferings is to allow companies to raise capital to grow theirbusinesses, while giving investors the chance to own a slice ofAmerica's most promising companies. Forget about day tradingand stock picking, regular people should be able to get in on IPOsin a sensible fashion, through mutual or index funds. But the truth is that Facebook's valuation had grown so large thanks to several huge venture-capital rounds totaling arecord-breaking $2.2 billion that by the time the offeringreached the public, it was already overpriced. In other words,insiders (and others, like Goldman Sachs, which invested $500million last year at a $50 billion valuation) bid up thecompany's stock price, leaving little upside for publicinvestors. "The I.P.O. system only works if it preserves abalance between public and private investors," writes the New Yorker ‘s John Cassidy. "If this balance is upended, andvirtually all of the rewards are reserved for insiders, ordinaryinvestors will refuse to play the game. A dearth of I.P.O.s wouldhurt insiders along with everybody else." It's a shame that one of the most anticipated IPOs in recentmemory was marred by a serious price miscalculation, not to mentionwoeful first-day trading execution. Some have argued that the lackof a huge first-day pop is a good thing and in a sense it is,because regular investors could have lost a whole lot more thanthey did. And the mispriced IPO may cause bankers to be more conservative in the future. But the various problems with Facebook's IPOreinforce some of the worst stereotypes about Wall Street: Thatit's skewed toward insiders and top banks to the detriment ofaverage Americans. That its systems have become too complex foreven one of the top exchanges to manage properly. And thatit's driven by hype that often obscures real financials,injecting an additional level of risk into capital markets that mayultimately drive away potential investors. MORE: Sick of Hearing About Facebook IPO? You re Not Alone. 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