Facebook IPO: five things to know before buying the stock
About 1 out of every 8 people on the planet have a Facebook account. Now, with the arrival of a public stock offering, all those people have a chance to be part owners of this social hub. Should you buy? Here are five things to consider.
3. Warnings aside, buying an IPO can pay off
Google, the IPO that springs to mind as a rival to Facebook on the hype meter, serves as a reminder that small investors can be winners on a stock's opening day. Google set its offer price with an unusual auction process, and then saw its shares jump more than 17 percent (from $85 per share to $100) on opening day.
Even if an investor bought on that day at $100, the price premium was no barrier to making a profit on the deal. Google shares have risen fivefold since then, although the ticker symbol "GOOG" hasn't been a top performer lately. Those gains all came before recession hit the economy in late 2007.
Technology companies can be volatile investments – great when investors see rapid growth and command of a marketplace. Think Microsoft and Intel in the 1990s or Apple more recently. Facebook could prove to be that kind of company.
Note, though, that dominance for tech firms often fades, and even now many people question the idea that Facebook will have unrivaled clout in social networking. Your own Facebook friends may not click the "like" button on this stock.
Half of Americans view Facebook as a passing fad, according to a new Associated Press/CNBC poll. Among Americans who are investors, 58 percent say the offering price is too high, while about 3 in 10 investors see the IPO as fairly priced.