I keep getting the same email over and over: “When should I buy Facebook?” Another one I am getting: “I feel ripped off, as it is falling.”
Everyone thinks that an IPO is a safe investment, and a sure thing. Remember, those behind the IPO added shares near the last minute to make this a bit larger. Maybe you saw headlines like this:
That headline – “Facebook insiders add shares to boost IP” – reads as if they are doing something good for investors. I heard it spun all over as this is a good thing. Read the sub-headline: “Early investors, VC firms may see additional $3 billion from debut.”
Really what that all means is they saw this intense buzz. They knew they could add to the IPO and successfully sell off more shares. That really means they just sliced the pie thinner. It is like cutting a single pie twice so everyone can get a second piece. Same pie. Same weight. More slices. Half the size. Now, FB did not double the number of shares, but they did dilute it some.
They were successful: 573 million shares traded on May 18th.
I do not feel anyone got ripped off, or taken. This is the way IPO’s always go. Some massively go up. Others flounder around a bit, and then move to a true valuation for the stock. I think General Motors made a lot of us think before diving in. While it is just as likely it is their marketing department at General Motors that failed, that bad press was noted by everyone. I saw a great Bloomberg article that put it all into perspective. See that in the sources below.
Would I buy FB stock right now? Well, it is trading at $32.36 as I write this, with a low of $30.98 so far. I might put a limit order in to grab some at just below $31 for day trading purposes, then try to grab a small gain. As for holding the stock right now, no. I think there are too many people that have shares here that are worried. They could still push it down.
Overall, I want to watch it trade some. I want to hear more about revenues from the company. I want to hear about how they are further going to monetized this property, and get more per user than they are now. I want to know if the increased use of mobile devices with Facebook apps and HTML 5 versions of the site can be monetized as well as the web site.
Personally, I think all the answers will be – YES. I look forward to playing this one more and mover over time. Like LinkedIn, Facebook is a unique property. Others have tried to emulate the product, and they failed miserably. Google Plus still does not hold a candle to Facebook, and likely never will.
Is it a buy?
I think we are at or near the bottom. I think it is a safe bet to hold. That being said, I do not anticipate even putting in an order myself for about a month or so.
Good luck to all in FB! NOW – please like this post and post it on Facebook!
SOURCES: