It seems like my skepticism of Facebook’s initial public offering (IPO) was warranted. Facebook’s (IPO) was offered on May 18, 2012 with an opening price of $38 per share. It jumped to a high price of $45 before closing just above the initial offering price at $38.23. This means that many people who purchased Facebook shares sold it within a few hours of the initial offering. The priced closed on Friday at $31.91 . Overall this stock has greatly underperformed the initial estimations.
I am not a hater of Facebook and I never want to see a company fail, unless it needs to of course. The Facebook IPO reminds me of that movie that all your friends told you it was the funniest movie ever and when you saw it you didn’t find it funny. The media loves to hype things up, if you haven’t noticed, and this can lead to irrational decisions by investors. I hope Facebook succeeds, but there is a lesson to be learned.
Just because the media jumps off the bridge doesn’t mean you should follow.. Prior to making any kind of investment decision make sure to do your own research. A quick Google search showed me that Facebook’s revenue was primarily from advertising; 85% to be exact. This tells me that Facebook has too narrow of a business focus and needs to diversify in order to succeed over the long term. You don’t have to be a rocket scientist to find this information. Just like Facebook has done, use the internet to your advantage. Now on to the next Dot Com IPO that becomes a media darling.
Did you buy Facebook shares? What do you think the share price will be after the first 6 months? ( I think it will hover around $30, but I think it’s true value is around $20)