Facebook Stock: To Buy or Not to Buy?

Kimberly Watson, Editor in Chief
May 29, 2012 /

Facebook stock is by being regarded by many as the proverbial gravy-train, or the next “Google”. However, caution could be recommended at present when related to the Facebook shares saga. The odds of striking another Google type bonanza in the current market are not considered favorable.

There is naturally a temptation to buy Facebook stock immediately, but this should be tempered with the thought that the most desirable of public stock may lose appeal following their first trading day. It is obvious that some company insiders could make a profit by selling at the opening price, as will investors with influence, who sell after the first day frenzy.

The huge volume of average investors will pay more for their stock than the original smart and in the know buyers. It is also shown by the records of previous much acclaimed shares, that buying Facebook stock on Friday, provided the opportunity for losing money.

Among the rave shares of last year, are IPOS that are no longer having that status. For example, Pandora was an Internet radio company, which on June 15, went public at $20 per share. The following day, the stock was listed at $26, but now its trading value is less than $11. Groupon was another example, as was Zynga, who developed “Farm Ville” among other Facebook games, but which is now trading in the region of $8.

An example related to Facebook stock that could be related to the risk element, when it is factored into buying highly rated shares is that even an IPO star of last year is not a great winner. LinkedIn more than doubled its offered price of $45 almost immediately after entering the market on May 19.  It attained a value of $122.70 and closed on the first day at $94.25.

Following a variable year, it is now trading in the region of $105. This is a relatively modest gain from the first day, of 11%. In general, those investors who would like to buy and hold, to make money from Facebook stock, should perhaps wait and consider buying later!

 

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