The Facebook IPO (You In?)

Facebook IPO

Facebook’s IPO is finally upon us. As of about an hour or so ago the shares have officially priced, and it is ready to trade tomorrow. So, you “like” it at $38? Tomorrow at 11AM eastern time we’ll see just how much it is liked (at least in the very short-term). At $38, Facebook is basically worth about 100 billion dollars (give or take a few billion). Of course, the general public won’t have a chance to buy it at $38, as it will assuredly pop at the open. My guess is you’re looking at something like $45 at the opening of the stock, and who knows what happens after that, but I can’t imagine anyone in the general public having a chance to own any shares below $40. And my humble guess is there won’t be much opportunity to get shares below the aforementioned $45. The reason being; that all the negative spin, valuation questions, and lock-up expiration realities you can throw at this (and many are justified arguing points) get thrown out the proverbial window at 11AM, as it will simply trade on hype (and the one thing the human psyche hates more than losing money…is missing the boat). People will chase it.

There are so many talking points on the Facebook IPO that I could likely write all night and into the actual time of it trading in the morning. Facebook, regardless of your use of it or opinion of it as an investment, is truly a phenomenal story. The milestones it has created with going public at this juncture, the tug of war between Wall Street analysts and the hedge fund elite as to how to value it, and the simple fact of it being so pervasive on this planet Earth we call home are just a few things of worthy note…and that is really only scratching a surface of a substance with great depth.

If you want to own it even at this point of it being a $100 billion company, there are still many arguments for this position. Their growth rates and margins are still massive relative to large-cap companies. Facebook is really still an infant, only eight years-old or so, so you could argue it’s best days are still yet to come. They have the potential of monetizing mobile, creating AdSense type networks, and creating wholly different commerce possibilities (of course using “Facebook credits”, which may be worth more than a Euro when it’s all said and done). All these things are credible reasons for wanting to own the company tomorrow (at almost whatever the price).

If you wouldn’t even want to own Facebook with your friend’s money, there are arguments for that as well. Like the fact that many inside holders of the company (many initial investors) are selling massive stakes in the company as part of the company going public. As much as 50% of their holdings are being sold by many insiders. This, coupled with the fact that even more inside shares will come out of a lock-up period at different points over the next 180 days doesn’t exactly paint a picture of fervent enthusiasm by the ones that know the most about the company. It’s also been argued it is simply a long lasting fad that will eventually go the way of other supposed giants of the Internet. You could also be a throw-back type, and make the argument that they really don’t “produce” anything. That they are very much reliant on an active and healthy advertising market, and if there is any type of slow down in growth this $100 billion locomotive will quickly come off the tracks.

Either of the preceding paragraphs/positions are sane stances at this capitalistic inflection point. I won’t make a prediction one way or the other. Hey, if it someday rivals the market capitalization of Apple, then you are talking about making 6 times your money even at tomorrow’s prices. But, it could also go the other way. The Internet’s gold and the public’s perception of what is “in” can be a fickle creature, and who knows, maybe we’ll say in ten years that Facebook was more like Netscape than it was like Microsoft or Google. You just never know, and that’s what makes a market.

One thing is for sure though. I can’t be too far off from being a multi-billionairre. A look at Mark Zuckerberg, and me (Uncanny):

* We both love hooded sweatshirts. Truly probably my favorite piece of apparel.
* We both like the Internet. So alike here, man I love the Internet.
* We both run a website with controversial growth prospects.
* I’m on Facebook. So is he.
* I didn’t graduate from Harvard. Neither did he.
* My full name has 22 letters. His has 20. Not exact, but close. Man, do the similarities ever end?

Well, I’ll leave it at that. One thing he’ll be able to do tomorrow that I won’t. Status update: “Net worth, 25 billion”

Facebook Initial Public Offering

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  1. B. Davey says:

    Get long on Facebook and GS tomorrow.

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