May 18, 2012

How wise would it be to buy stock in Facebook at the IPO?

There has not been an IPO that has generated the same sort of buzz as Facebook in quite a while. Sure there was Zynga (or as I like to think of it, Pets.com-ville). Are the people jumping on the Facebook train getting on early for a long and profitable ride, or did they just buy tix on a trip to financial nowhere?  I'm not looking for actual investing advice, I am just curious how other people view it.

Wouldn't touch it.

I think IPOs are always iffy.  There hasn't been anytime for the stock's natural valuation level to have been determined in the marketplace.  It is a hope, based on a limited information and history.    


It may just be my natural skepticism, but I just don't see Facebook as an innovative company that will indefinitely grow.  I see increased privacy concerns, both from an individual and legislative standpoint, as a potential limiting factor.  The question, as I see it, is whether Facebook has become, or in the future can become, a necessity of modern life.  You have some movement towards that in sites that require you to log in using Facebook (turntable.fm comes to mind).  So you are force to engage with Facebook, whether you want to or not.    Of course, that can result in unintended blowback.  Speaking for myself, I now only use Facebook to log in to sites that make me use it. I don't accept friend requests because I don't want to be forced to share all of my friends information with countless entities.  


The other possibility is that something new comes along that we haven't considered.  Look at MySpace; it was the Big Dog for a period, and while it has experienced a bit of a resurgence lately, I doubt many people would consider it really important that one have a MySpace account.  Google+, while not yet a true competitor, may evolve into one over time.  All it takes is one new "thing" to come around, whatever it may be, and give people a better alternative to Facebook.  

I wouldn't touch it with a ten foot pole. Facebook's business model is based on advertising. What else do they have offer over the long run? Who knows when another social media network will come along and steal their users, or if the whole thing will just end up being a fad that blows over.

It's definitely not something I'd invest in unless I was doing it for entertainment purposes with money I didn't really care about.
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