Facebook shares fell to a record low as it entered its eighth trading session today, bringing its total losses up to 20 per cent since flotation.

Sam Hamadeh of Privco told the Telegraph that the problems had been caused by too many early assumptions about Facebook's future performance. He said:

Reasonable people can disagree on future growth potential for a company, but these assumptions do end up making an enormous difference in fair value estimates. But those valuations would require Facebook to grow some 75pc annually for the next several years.

From the vantage point of behavioral finance the unfolding Facebook IPO fiasco was neither an order flow glitch nor a technical error by the Nasdaq. Nor was the problem a simple share value miscalculation by analysts. All attempts to grasp the Facebook IPO face-plant in these terms is to deal the surface symptoms and to miss the underlying cause.

The Facebook debacle is a textbook case of the collision between human needs and the nature of the financial markets. What went so wrong with this IPO can only be appreciated in terms of the intersection of collective human behavior and finance. The mass psychology of this IPO was that of a classic mania. And that meant a multitude of problems were rendered invisible. We are referring here to two critical and related issues – the timing and the valuation assumptions.