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Saturday, May 19, 2012

my two cents on Facebook IPO

I think that all of the hype behind the Facebook IPO is the primary reason that it only closed .6 percent higher at $38.23 than its open of $38. This still was the single largest IPO for any technology company. Still shadowed behind the one day IPO of Google in 2004 that had an 18 percent return.

It still is hard for me to romance a stock that is based on something that in reality doesn’t exist. I mean, Intel manufacturer’s chips, Dell and HP put out computers and we can see and touch them. In addition, many people are viewing FB as a fad. Look what happened to MySpace, it almost doesn’t exist anymore compared to what it used to be.

According to, the U.S. Securities and Exchange Commission (SEC) is investigating into why initial trading the stock took a half-hour longer than NASDAQ OMX Group Inc.’s forecast. The underwriters of the stock, which numbered more than 30 of which included Goldman Sach’s (GS),(remember, they were the ones that avoided BK during the subprime mortgage meltdown due to the fact that the U.S. Treasury Dept.’s head chief was an ex-GS executive…Hmmmm) purchased the stock to keep it from dropping below its IPO price.

This IPO made FB more expensive than every stock in the S&P 500 except Amazon and Equity Residential. FB sold 421.2 million shares, raising $16 billion dollars. Not bad for a Harvard drop out who is only 28 years old.

I used to be an avid day trader, spending more time watching the ticker on my screen while at work than actually doing the work that I was paid for. I would never buy a stock that traded at 107 times trailing monthly earnings.

Without question, anyone who WAS able to buy this stock did so mostly because of emotional reasons. I guess I am still stuck on buying something that isn’t tangible, even though Amazon, eBay and Google are also virtual company stocks, they all offer something that I can either get an answer from, buy new plants for my garden or purchase a book. That’s my two cents on this subject.

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