Facebook IPO

Discussion Forum

Week 3 –Discussion topic

Check out recent articles on Facebook. Here are a few discussion issues:

Why did so many people criticize the entire Facebook IPO?

Did Facebook and its underwriters do anything unethical in their handling of the IPO?

As a savvy investor, would you have:

a.    Bought Facebook during the early IPO ($38/share)?

b.    Waited a few weeks until the price settled?

c.     Sold the shares if they went down?

d.    Held the shares if they went down?

At this point, do you think an investment in Facebook is a wise choice

It is important to know what we should do before IPO and the first day as investor.

Initial share price during a public offering tends to be higher than Public offering price. The public offering price ($38) had been determined earlier than the first day (5/18) by selection. This selection is kind of lottery. Investors are able to prepare it based on IPO schedule which is supposed to disclose within 3 month before IPO. This type of savvy investors is close to FB staffs or well-known people about FB statement or secret.

So, if we buy it before IPO, we could gain a profit. However there is one risk which has to be hedged. Especially after the first day of IPO, any stock fluctuates and they know real potential of FB. This is the reason why many existing investors sold their stock during the first day. If we are common investors who are going to invest after their action, we should know their meaning of amount of sell and make a rational decision to buy it. If I invest at the time, I wont buy it after first day because well-know people sold it.

In conclusion, there are a lot of negative factors which are criticized after IPO.

·    CEO doesn’t care investor and confirm IPO price.

·    GM discorded advertisement on FB

·    IPO market had grown and everyone knows the tendency. (After FB incident, IPO market stoped.)

·    System fault of NASDAQ

Everyone can’t live without FB so I think its ok to invest and the price is low now. Warren Buffett did same thing for credit card.