Why The Facebook IPO is Not For Me

Unless you’ve been under a rock, you have probably heard that Facebook decided to “go public” and begin trading on the open market as of this morning. For Facebook (or any other company), an IPO (initial public offering) offers a unique opportunity for a one-time cash boost and other perks.

Are you investing in Facebook?

There was tremendous buzz around this IPO (initial public offering) leading up to today’s launch of the stock, so it’s very possible that you were part of the action and now own Facebook shares.

In fact, one of the unique things about Facebook’s IPO was the high level of participation from “retail” investors (like you and me) versus institutional buyers.

As I was watching Bloomberg this morning, there were reports of some online broker’s sites crashing from the investor traffic. They were also reporting that the delay in opening Facebook’s stock for trading this morning could have been due to all of the retail trades essentially “clogging up the pipelines” in the system.

Am I investing in Facebook?

I did not, and don’t plan to, though I might have.

Had I bought into the IPO, I would have bought shares for the ultra-long term (5-10 years), and mostly to say that “I was here” when it happened, rather than with the expectation of profit.

To believe that Facebook’s shares will go up would be to believe that the company can sustain continued growth, innovate, and generate healthy profits.

Given Facebook’s history, my impression is that they would rather implement changes by force rather than listen to feedback, and I’m also concerned about the increasing competition from new platforms like Google+, which can draw users and attention from one Internet mogul to the other.

Who’s making money here?

CNBC seems to think that it’s the retail investors that are getting shafted; that the deck is stacked against the casual investor who simply wants to be part of history or thinks this is a get-rich-quick opportunity.

A lot of analysts are worrying that Facebook’s IPO is widely overvalued, and that their income and future potential is not in line with the price of the stock. Yet the frenzy continues…

Dig deeper

Facebook’s recent purchase of Instagram for $1 billion was a hot topic of debate with investors as the IPO date loomed closer. Seeking Alpha reports that the move could be seen as indicative of a renegade leadership by Zuckerberg that could continue after the public offering.

The same article outlines a share-type and voting arrangement that could effectively leave primary control over all business operations in Zuckerberg’s hands, whether stock investors agree with his decisions or not.

Final thoughts

If you ask me, this stock is too hot right now to touch with a 10-foot pole. I’ve been an index-fund investor for some time, and this is not a stock that will bring me back into the open market. Facebook is already “here,” not the next hot thing, and I’m worried about the future growth for the company.

As always, I know nothing about the stock market, this is only my personal opinion, and you should make your own decisions after consulting with your financial professional. 

(Photo credit)

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