The second biggest Internet company in the world today, no other on-line creation has done more to waste employee time than Facebook has! It is so popular, that many companies have now even banned it. Whilst Facebook has moved away from applications (virtual garden, anyone?) to personal communication: making it easier than ever to keep in contact with photos, videos and updates, it has continued to bring in tens of thousands of new users every day.
With any company of this size and success, there will always be excitement in the investment community about possible profits to be made; basically, everyone wants a slice of the pie. Facebook investment is a hot topic and if you want to invest in Facebook, then this article is a must read.
Whilst Facebook is still a private company, rumors are going around that it intends to hold its IPO in the not too distant future (whatever that means), and many investors will be looking to cash in on this opportunity. Facebook investment is coming soon!
So, the question that I am here to answer is: when Facebook goes public, is it worth having a flutter?
The simple answer is…no. And the reasons for this? Well, here is are three good reasons why not:
1 – The ground floor of this company was many years back. So an IPO will far from represent the “beginning” of the company like many other IPOs do. Also, the shares of a company this well-known are not going to act in a predictable way. Investing in Facebook will be a guessing game like no other!
2 – Due to its popularity, there will be a large number of unsophisticated investors who know nothing about investing in IPO’s and who blindly think that with Facebook being so big, they cannot possibly lose. This means that the price of the stock may therefore be driven artificially high, in a company which to this day does not have a reliable income stream.
3 – Dotcoms have a very volatile lifecycle. Yes, you may scoff at this: it is Facebook after all! But after going public, the creators have less to lose and dotcoms have in the past suffered as a result. I’m not saying that Facebook is going to lose its value overight or anything like that, but in the long term the nature of the business means that I consider it a very unreliable investment.
So what to do when Facebook goes public? Well, unless you are one of the lucky few who can get in right at the moment it goes public and sell fast before the hysteria ends, then you are best just remaining an observer for the first while, seeing how it pans out, then perhaps getting in when things have calmed down and the stock has corrected to a “non-hysteria” price. Even then, I wouldn’t invest too much, as who knows where Facebook will be taken once the public gets involved in its business affairs.
For more information, go to:
http://www.guardian.co.uk/commentisfree/cifamerica/poll/2011/jan/07/facebook-ipos
