What is an IPO underwriter and why does Facebook need 31 of them?

"Underwriter" is a defined term under Sec. 2(a)(11) of the Securities Act. Essentially, it is a person (or entity) who purchases securities from an issuer (i.e. a company or a company's affiliate) with an intent to distribute those securities rather than holding them for an investment purpose. Practically speaking, underwriters are typically financial institutions who purchase securities from the issuer and immediately resell them, generally to large institutional investors. At that point the securities are publicly-traded and can eventually make their way to retail investors. The underwriters typically receive a fee for this service from the company, which is generally determined by using some percentage of the offering size. Companies use underwriters for a few reasons. One reason is to facilitate a desirable distribution of their shares. Investment banks have ongoing relationships with a wide range of large and/or institutional investors and can thus "build a book" for an offering (i.e. find purchasers for the securities) that consists of investors a company would want to have (e.g. patient shareholders who will not immediately sell at the first sign of trouble). The banks may also have knowledge of the general market conditions for the company's securities based on their own experience with similar companies or what they have seen on other offerings. This can be useful to the company in predicting demand, pricing the offering, etc. Lastly, the term "underwriting" is a term that comes from the old insurance markets in London, and it refers to the endorsement of a particular company/enterprise by a financial sponsor. Having a well-known underwriter can have reputational benefits to a company, on the theory that a prestigious investment bank would not put its imprimatur on an unworthy company or offering (the names of the underwriters appear prominently on the cover of offering prospectuses, and the bank whose name appears highest and to the left holds the most desirable position). Underwriters will hire their own lawyers and perform their own due diligence investigation of the company and its business. I don't have any particular insight into why Facebook chose to use so many underwriters, but simply to repeat what others have said, it is possible that it may be due to the size and desirability of the offering (larger offerings need bigger books of investors, and the underwriting cost to Facebook might not be as high as for other companies because the demand among banks to participate is so high).

Let me give a more cynical answer to the why 31 part of the question (Hey, cynicism was on sale at Costo, and I bought at giant box of it.) >>>  Facebook is spreading the wealth to buy friends. One obvious move is they included an number of women/minority owned i-banks in the deal. The other is that the whole deal could be done with maybe 5 to 7 i-banks, so 31 is a pretty large party anyway we slice it. Goldman another big U.S based JPMChase, Morgan Stanley,or B of A Merrill Credit Suisse one for Japan One for Asia That will cover about 80% of the funds and major investors in the free world. Major investment funds, like pensions, college endowments, etc. use several different brokers.  So do large hedge funds. If I were running the FB IPO, I would do pretty much what they are doing.