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+--- Thread: There's a lot of discussion that Facebook may become a publicly traded company next year? (/thread-34740.html)
There's a lot of discussion that Facebook may become a publicly traded company next year? - Missy - 11-09-2012 07:25 PM
Is it a wise investment?
- Eddie W - 11-09-2012 07:34 PM
Facebook is indeed a success story. I do not see why it would not become an overwhelming stock.
- Dave W - 11-09-2012 07:34 PM
My answer to that is that it will depend on what price the stock is trading for relative to the earnings the company is making. My guess would be that if you can get stock in the IPO, it would likely be a good deal at least in the short term, but probably only rich and/or well connected people will be able to get into the IPO so unless you fall in that category, you'd have to buy in the open market after the IPO. With high profile companies, what often happens is that the price goes up dramatically as soon as the stock starts trading, usually beyond and sometime far beyond a reasonable valuation because people are so excited about what a great stock it's going to be that they pay too much.
I think a lot of the people that bought stock in the IPO then sell it after a short time when it becomes overpriced for a pretty good profit. After the initial enthusiasm wears off and/or the first time the company reports earnings that are not quite as good as expected, the stock often drops quite a bit back down to a reasonable valuation.
So if it were me, I'd say that if I could find a way to buy shares in the IPO itself, I'd likely do that. If I can't I would not buy into the euphoria that comes right after the IPO because it's hard to know when that will end and the stock will drop back down in price. After a few quarters of earnings have come out, if they seem to be doing well, I'd look for an opportunity to buy the stock at a reasonable price if possible but if it's still at a ridiculously high price I would just stay away. Look at Netflix, SodaStream, and a few others in recent weeks (or any of a large number of "dot com" companies a decade ago) to see what can happen when "irrational exuberance" surrounding a stock suddenly ends. I don't want to be caught in that and my guess is that Facebook would likely have that soon after it goes public.
- The Dark One - 11-09-2012 07:34 PM
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