Disclaimer: This is just a blog post, didn't bother to cite sources for the facts...I am not and investment advisor, Trading has risks and the risk is your own. Just and attempt at a blog post . These are just my opinions. I would love to hear other opinions too.
YUUUUPP!!! Facebook finally filed for their IPO last week and I bet, by now everyone and their momma knows about it. Let me start by getting the facts out of the way. The company is seeking to raise about 5 billion from this offering which will take place sometime this spring. Its share traded as high as 40 dollars a share in the secondary markets in the past week before the trading was halted in the secondary markets. Facebook is currently valued at somewhere around 75-100 billion or at least that’s the highest I have heard/read so far. Zuckerberg still owns about 28 percent stake in the company and he is about to transition into a dollar CEO pretty soon without any stock awards or bonuses. This will make him eligible to file for foodstamps as well as Earned Income Credit. Warren Buffet might roll over in his grave even before he is dead upon hearing that. So much for the Buffet Tax!!!
Flashing back to when Linkedin went public, the stock popped more than 50 percent on the day of its IPO. It was supposed to open at 45 dollars per share and it ended the day close to a 100 dollars a share. The humongous pop might be relative to the small float the company let out. After the hype faded, the stock pulled back for a couple of weeks all the way down to 60s and then the patient investors came in and bought some. A couple of months later their earnings hit as well as the IPO lockup expired which beat the stock all the way down to the 50s.
On the other hand, Zynga (ZNGA) let out a slightly higher float to avoid the flippers. The stock popped in the AM and gradually faded off the same day and dropped like a rock all the way down to 8s.
In the past couple of weeks both of these stocks have been gearing higher with an ever so bullish market as well the “oh so mighty” facebook hype. This begs the question, will FB (facebook ticker) behave the same way? My humble opinion, probably not. It will probably exceed and excel all expectations. The problem with LNKD was its earnings which put the valuation of the stock on the pricier side. ZNGA probably has a lot more trading to churn out because its too early to say anything with price targets ranging from 8s to 16s. But FB, being the core of all this hoopla, might just double or yet even triple its market cap on the same day itself. Why you might ask? That might even be a rhetorical question when you do, but hell, my friend's one week old son is on facebook. That should just about sum it up. Besides, not to state the obvious, it has strong earnings, growth rate and all that good stuff. Pessimists might say the company is peaking right about now and the insiders realized it and they are cashing out. That is a valid concern too, but hey the market trades on hype far more than it trades on fundamentals and the hype is just too big. The stock might not even have a buyable dip for a while and it might just even test the patience of the patient investors who usually stay on the sidelines for the hype to fade off.
Let me just reiterate how big the hype is. A woman got caught selling fake facebook stocks recently. She allegedly sold stocks to her contractor, some old lady, and a bunch of other people and scammed them for tens of thousands of dollars. If that does not clearly illustrate how big the hype is then I don't know what will.
A couple of stocks I have been trading lately with all this hype:
VRNG – makes facebook apps
ZNGA- the infamous farmville maker which sells fake goods for real dollars, accounts for 12 percent of facebook's revenue
SVVC- has about 4 million or something invested in facebook , the run up is jst baseless
GS-has a sizeable investment in facebook , valued facebook at around 45 billion about a year ago
RENN- chinese POS , facebook of China, got mentioned in facebook's S-1 filing
LNKD- mostly a sympathy play
WBMD- sympathy play
NFLX- waiting on bill or something for approval with facebook
There might be a lot more of these but, these are what I have come across recently.
All these have had a massive runups in the past couple of days, with some directly relating to facebook and some just plain sympathy plays with just about nothing to do with facebook. In my opinion, the hype probably fades off for a couple of days because theres only so much you can talk about facebook on the media. Its gonna get old. The charts look kinda top heavy too and due for a pullback, Selling(shorting) opportunities when the markets pull back and getting into them on the pullbacks for a long for the ultimate sell on the day of the facebook IPO.
As far as FB goes I will probably flip or swing it cuz I am a trader. As far as an investment, If you can get in within the first couple of minutes on the day of the IPO,it should be good. Anything after that..well who knows, its all about guessing where the top is.
Or you could try to get into the Lockup issues, which I believe will really be hard to get into for an average investor.
OR just wait for the lockup to expire and buy that pullback.