In my 30 years in the markets, Facebook FB is one of the most anticipated Initial Public Offerings (IPO) I have seen. The stock will start trading on Friday if it gets all approvals.
Here is a game plan investors may consider.
Back up the truck and buy in the IPO
For some time now I have been advocating that investors should back up the truck and buy all the shares they can get in the IPO. For those who are able to get shares in the IPO, buying Facebook with both hands is a no-brainer proposition. Demand is simply far higher than the supply. This is remarkable considering the size of the IPO. Facebook is likely to offer as many as 388 million shares. The price range is $28 to $35 and may be raised. At $35/share, the company will raise about $13 billion and will be valued at $100 billion. This will be the largest technology IPO in the United States. In history, only Visa V +1.38% and General Motors GM +3.97%have been larger IPOs.
Those who cannot get shares in the IPO
Many retail investors are likely to rush to buy shares in the open market. This is akin to gambling. The reason is that it is foolhardy to buy until a trading pattern is established.
Potential buyers should ask themselves a simple question to ascertain if they are investors or traders.
At this time there is no way to know where the stock will open. Those who consider themselves investors may consider buying, but only a very small quantity, if the stock opens below $55…Read more at MarketWatch
