I don't think there is a single person that isn't aware of the upcoming Facebook IPO. After endless speculation Facebook filed papers this week to go public. And with the filing, we now have endless articles, opinions, reports related with Facebook (as if we didn't have all of that before!).
Here is what I have learned ...
- Facebook plans to raise about $5 billion.
- The IPO should value the company at between $75 and $100 billion.
- There are going to be tons of actual billionaires and very many multi-millionaires.
- Heck even the artist who drew the murals on the walls of Facebook's offices could have his stock turn out to be worth about $200 million.
Is Facebook a good thing to invest in? Should you try to get in on the IPO? Should you try to buy the stock on Day 1? or Day 2? ever? never?
Here is what I think...
1. Facebook as a business is likely in pretty good shape. About 800 million active users is a lot. And most of these users have a lot invested in it ... friends, photos etc. So it is highly unlikely that there will be a mass exodus any time soon. It makes a good amount of money from Advertising. And with all the data available on the various users, it is an advertiser's paradise. It is already making a lot of money. That's a good thing and a lot of IPOs can't say that about themselves.
2. Social networks aren't going away. And you can only use a network that others are also using. You may love Google+ for example but if all your friends are over at Facebook, you aren't going to make the switch on your own. So its base of users isn't likely to disappear any time soon.
3. While the Facebook IPO will make a lot of people very wealthy, I am not sure that can be said about the investors coming in at this stage. Most companies IPO way before they are at the very top. If Facebook goes public at a $100 billion valuation, how much room does it have to grow? It would grow 4 times and immediately be in the Apple and Exxon leagues as the world's most valuable companies. Can Facebook be the most valuable company in the world?
I personally feel that Facebook has held off its IPO for far too long. That has resulted in the existing share holders benefiting the most from its growth. But as a result, that leaves very little further potential growth to be enjoyed by the average retail investor.
Does this make it a bad investment? Probably not. If Facebook has it in itself to rival Apple, you could invest $10000 and see it turn into $40000. Is that good enough for the average investor? Is that good enough for you?