ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Why Investing in the Facebook IPO Makes Sense: Should I Buy Facebook Stock in 2012, and at What Price?

Updated on June 13, 2012
Should You Buy the Facebook IPO?
Should You Buy the Facebook IPO?

Most anticipated stock IPO in years: Ticker symbol: FB

The hottest IPO (initial public offering) in years is set to take place in 2012 -- that of the social networking powerhouse Facebook, the second most popular website on the entire world wide web. Facebook's stock at the IPO might be initially overvalued, but there are a number of reasons why it could be a great long-term investment. Even if you don't frequent the site yourself (OK, maybe you do!), consider this -- Facebook has over 800 million active users, including growing numbers of a variety of mobile devices.

Should I Buy the Facebook Stock IPO?

As retail investors, we have to wonder if we are just 'sheep' being led astray by the greedy financial/investment industry. Is the Facebook IPO just a situation where the early investors and insiders want to cash out now and make their fortunes, or is there real value in the company going forward? How does Facebook make money -- where do their revenues come from, and how does that grow going forward without alienating their users? Will Facebook users who have posted hundreds -- sometimes thousands -- of photos, posts, comments, links, notes, etc. -- will they ever leave and move their content elsewhere? Does Facebook, founded in 2004 by Mark Zuckerberg and others in a Harvard dorm, have the edge of being one of the earliest and the biggest? Could any social network ever replace what they have built? These are all valid questions for investors... could other companies quickly arrive in this social media space giving Facebook some serious competition?

If you look at the recent IPOs of Groupon (ticker symbol: GRPN), LinkedIN (ticker symbol: LNKD), Pandora (ticker symbol: P), and Zynga (ticker symbol: ZNGA) -- you might realize that they haven't fared very well. Early buyers and investors would have been better off to wait to buy these companies on the pullbacks that came after the IPO. But there is another way to deal with this as news shares start publically trading. If Facebook's IPO price is high and early investors want in - they can easily buy some shares immediately -- maybe half of their intended position -- and then wait 2-6 months and buy the rest. If the stock goes down they will be able to add to their holdings at a much better price and dollar-cost-average (DCA) their Facebook investment. If Facebook goes higher, their initial shares will show a paper gain, and they can just add more on the way up - if they stock still seems fairly valued.

There are a number of reasons why a private company like Facebook would go public with an IPO (initial public offering of stock). The main reason for Facebook might just be that they have to -- specifically the SEC rules governing the disclosures after the number of shareholders crosses 500. But investors must consider all the other reasons... Some online have said that this entire IPO maybe a "trap" for retail investors. But if Facebook goes public soon, and they have a real infusion of cash (~perhaps upwards of $10B), consider what strategic initiatives that might make with that money. Is that worth a Facebook investment?

How Can I Get Exposure to Facebook Stock Now?

When investors buy one stock for it's financial exposure to another it is referred to as a "proxy". Buying other companies like Microsoft (ticker symbol: MSFT), Facebook's number one banner advertiser and early investor, or recently public social media game developer Zynga (ticker symbol: ZNGA) --which gets most of its revenue from Facebook -- are two simple ways to tap into the Facebook revenue stream. It's also possible to buy certain T. Rowe Price (ticker symbol: TROW) mutual funds to get exposure to Facebook, or through investment bank Goldman Sachs Group, Inc. (ticker symbol: GS), which has been offering private shares of Facebook stock to some of its elite clients.

CONCLUSION

To me, Facebook looks interesting, and because it's such a household name, maybe its IPO will have the trajectory of MasterCard (ticker symbol: MA) or Visa (ticker symbol: V), rather than some of these largely unknown companies that have come to market. There are other conservative ways to approach an investment in Facebook after they launch options on the stock, but that topic is for another article. As I continue to do my research into the possibility of buying the Facebook IPO, I will remind you that you must do your own research and consult with your own financial advisors before you commit any risk capital to any investment.

working

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://corp.maven.io/privacy-policy

Show Details
Necessary
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
Features
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Marketing
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Statistics
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)