How To Buy Facebook ($FB)

By: ispeculatornew
Date posted: 05.17.2012 (5:00 am) | Write a Comment  (5 Comments)

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I’m a true believer in Facebook in what will surely be a very controversial IPO. On one side, there are investors such as myself, who believe Facebook has tremendous value, that it is just getting started, that the numbers that matter are not the number of users but rather revenues increase and influence on the web. I am part of the group that thinks buying Facebook at a valuation of $100B is a real bargain.

On the other side, there are the millions who think that only muppets are buying Facebook, that it is the biggest proof that we are right back in bubble territory, that with its nearly 1B users, Facebook’s growth has stalled, that it’s not worth anywhere near the 50 P/E that it will become public at.

Choose Your Camp

This is a black or white issue, you have to take a side, there is no middle. You’re either with me or against me:) If you’re against me, no need to keep reading, please do come back tomorrow or skip to my next post!:) And please do not try to short Facebook, it’s like playing Russian roulette… you might win, but your odds are not great. The borrowing costs will likely be high as well.

How To Trade Facebook

If you are a believer in Facebook, you might be one of the 10-20 people that have emailed me, let’s go over how you will be able to get it done. A few months ago I was complaining about the fact that it was nearly impossible for me to trade the stock but as it will become public, I think now is a good opportunity.

IPO Purchase: If you are a client of one of the underwriters of the Facebook IPO, you might have been contacted already about buying stock. If not, you can always try although your odds are probably not great. This is without any doubt the best way to buy the stock, it’s likely the lowest price you can get. In fact, very few stocks open that close to their IPO prices. They sometimes trade much higher as was the case for LinkedIn (LNKD).

The Unlucky Ones

If you are part of the majority that cannot get its hands on Facebook stock at the IPO price, you are in for a much more difficult task. The biggest problem is that the stock is likely to be CRAZY in the first few hours, just take a look at the trading on LinkedIn in its first day:

 

It gets a bit better after that first day but still remains too volatile for me. I know that it might mean getting the stock cheap but it could also mean overpaying by 10-20% or more. That is not something I’m interested in as I would be buying Facebook with a long term perspective. If you are planning on trading Facebook in the first day or first few days, it would be for short term trading purposes which can work but will prove difficult as you will be trading against a bunch of machines, algo traders, etc.

How I Will Proceed

Quite simply, I will wait a couple of weeks for Facebook’s stock to become more calm and then evaluate it from that position, hoping that it still represents a great buy. If it is the case, I will be making this purchase, not as a long & short trade but as a long term speculative buy. What about you? What’s your plan regarding Facebook?

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5 Comments

  1. Comment by The Money Mial — May 17, 2012 @ 5:51 am

    Many people jumped to buy Facebook in the secondary market where it was trading for about $32-$33 for a long time. Sites like second market have been brokering them for a while.

  2. Comment by IS — May 17, 2012 @ 5:53 am

    @The Money Mial – Very true but you did need to be US citizen and be an accredited investor

  3. Comment by Stephen — May 17, 2012 @ 10:54 am

    I’ll just wait and see what happens.

  4. Pingback by Top Dividend Links — May 18, 2012 @ 4:01 am

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