Facebook Stock IPO Good Investment

Invest In Facebook Stock IPO?

Facebook recently generated some buzz in the investing world with news that it underwent a restructuring. Facebook stock was redone so that there are now two classes of Facebook stock. One class of Facebook shares has much more voting power than the other class of Facebook stock shares. This structure is similar in design to Google stock structure in which one class of Google shares has controlling voting rights interest while the publicly traded Google stock has almost no say in how the company is run.

The question is, if the company goes public with a Facebook IPO should investors buy Facebook stock, and are Facebook shares a good investment?

Invest In Facebook Stock

While Facebook has not gone public yet, there are indications that it intends to do so in the near future. This is not surprising considering that the company is riding high on a wave of publicity and that the number of users registered on Facebook continues to grow at very high rates. Ironically, however, the most compelling reason for Facebook to go public with an IPO soon is also the one that makes its shares a questionable investment.

Facebook loses money. It loses a lot of money. While the company has a ton of web traffic and therefore is in an enviable position, it has no revenue generating features in place except for displaying advertising. However, income generated by advertising doesn't cover the expenses of running such a complicated and resource intensive website, which is why the company continues to raise money through multiple rounds of venture capital investments and investment agreements with other companies.

In fact, the business model for a Facebook IPO seems eerily reminiscent of the business model of many technology stocks during the Internet Bubble of the late 1990s. An Internet company that has never generated a profit, but whose very nature as a high-trafficked web property means that enormous streams of future revenue are all but guaranteed, goes public without a concrete strategy for its future business and the public snaps up the shares hoping to triple or quadruple their investment in just months.

Supporters and company insiders, of course, dismiss such concerns out of hand noting that their enormous traffic base is coveted by such giants as Microsoft and Google. The catch is, that while those already very profitable companies can afford to wait and see how to make a profit from Facebook, or who can leverage the non-stop stream of visitors to increase the value of their other products and services, a stand alone Facebook has little hope of generating the necessary revenue to succeed on its own. 

While the company does indeed has a huge user base, and that pool of users is indeed diverse, there is still no plan to monetize that userbase other than displaying Internet ads. Unfortunately, it may be that the Facebook audience is much less valuable than other when it comes to advertising.

Consider how many of Facebook's users do absolutely nothing on the website other than share pictures and updates with their family members. How many grandmas log onto Facebook daily for no reason other than to see if pictures of their grandkids have been posted by their children? These users not only never click on an ad, they don't pay any attention to them either, because they have never made an online purchase in their life, making their "eyeballs" worth less than on other websites. 

Time will tell if Facebook can find a way to monetize its very fickle audience without driving them off to other services, or if Facebook is just a late entry to the never profitable Internet bust like pets.com.

In the end, it may be that Facebook's IPO serves no purpose other than to temporarily artificially inflate its value so that it can be acquired for a larger amount than is currently offered by major players like Google or Microsoft. The question is, will those companies bite for a larger price, or have publicly traded American companies learned the lessons of AOL and its disastrous Time Warner merger?


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Comments 17 comments

Rich 4 years ago

I agree, my entire family and I have never spent a penny due to anything relating to facebook and have been a members for years.. If they had some type of profit generating feature in place, it might be a different story..


Vinny 4 years ago

If it's cheap, why not?


Ben 4 years ago

vinny@How much is it ?


eric 4 years ago

CNBC seems to think its going to be around 40 to 50 per share. Part of me thinks its going to be huge and the other part sees a groupon mirror. Slow moving and no profit. What do you think?


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Evita's Fashion 4 years ago from New Zealand

As always only "Big Money" will profit from Facebook IPO (Goldman Sachs and some Russian Funds which invested in Facebook last year or so). The problem is IPO price will probably go double when market open so there is no possibility to get it "cheap" - and like you answer to Vinny - How much is "cheap". BTW great Hub. Thanks :-)


Tone 4 years ago

If face book charged users 10 dollars a month to thier users, i think they could maintain as an actual business. I think alot of people would pay, becuase facebook is a part of there life.


Chris 4 years ago

Well the TV has advertisements and not everyone watching buys either. Facebook also sells users info, and makes money off of games etc. I bet they can come up with many more applications that can bring much more revenue that probably are in the works now. At this point its all speculation, who knows a few years from now it could be worth 500 a share like Google or apple, then I bet there will be lots of people kicking themselves for not at least trying to get a few of them while they will still somewhat cheep.


crabby 4 years ago

they said it would open up from 120 to 150 way to high for the normal person. You would have to have lots of money to get in the game and make any kind of good money. I going to wait and see where it jump in at but all sources say 120 to 140 , i will be out if it that high. I Would get in if it was like 40 to 50 . Good luck to all that get in.


john 4 years ago

the price will be around $40.

for latest price and news about Shares of Facebook, go to www.sharesoffacebook.com


Don k. 4 years ago

The ipo price will be between 25 and 35 dollars.


Ralph J. Monasterio 4 years ago

I think that FACEBOOK is ONE of the BIGGEST CON GAMES in the history of the INTERNET. How could people EVEN think of buying SHARES of Facebook on May 18, 2012....WHEN THE COMPANY ISN'T EVEN MAKING MONEY on it's own?

It reminds me of the Internet bubble of the LATE nineties. The only INCOME Facebook can BRAG about out is HYPE, VENTURE CAPITAL, the SALE of client information to MARKETERS and ADVERTISERS, and a LOT of HOPE from POSITIVE THINKERS....that is....UNTIL their WIVES DIVORCE them for betting THE FAMILY FARM on Facebook shares.

Ole Zukie is IMMATURE to even think that he will GARNER over a BILLION dollars when the IPO opens to the public.

They are MAKING a LOT of FINANCIAL PLANS......that really WON'T materialize. "There is a SUCKER born every minute....and Facebook Will PROVE this."


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Hub Llama 4 years ago from Denver, CO Author

The company actually is making money, quite a lot actually. Whether it makes enough money to justify its valuation is another matter.


Gordy 4 years ago

What facebook has yet to tap is it's huge membership. Remember that Zuck developed a program that automatically makes up music playlists based on surfing preferences way back before The Facebook. Now imagine tapping into that kind of market targeting. Like good old fashioned TV, people are willing to tolerate solicitations when the service is free. No genius required here.


Joey gonzalez 4 years ago

This era that we live in, currently thrives on technology. Many of which are but not limited to younger folk such as myself. Whether it be through advertisement or simply charging its users for the services rendered, Facebook is on the horizon of a big boom. Think of all the dating sites such as eHarmony and so on, people will pay to keep in touch with their friends and family. Even if their current user base declines, there are still big time companies that will pay to use the reach of Facebook to users worldwide.


Ipo 4 years ago

The ipo shares are 38.00


sebby 4 years ago

buy the stock it will go up even higher then its trading .


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investments-tech 3 years ago

Facebook is not making money. It is generating revenues, but running at a loss.

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