The Facebook IPO: Should you try to buy stock – and is it even possible?

facebook-moneyNow that Facebook is on its way to being a publicly traded company, you might be interested in getting a piece of the action. And why not? You’re a huge part of the reason Facebook has experienced its success. This is a company built on the backs of its users and their unstoppable data-sharing (and its data-mongering).

Unfortunately it’s going to be difficult to get your hands on Facebook stock once its available. If you are seriously interested, you need to create a brokerage account and file an “indication of interest” regarding Facebook stock. Remember, it will be months until Facebook is officially a public company you can buy shares of.

And there’s only going to be so much common stock available, and it’s going to be priced high. Buying low is a privilege for a select handful of investors—and if you’re reading this, you are definitely not one of them. The fight for available retail shares will be something of a mad scramble. So…

Should you (try to) buy?

Really, big IPOs are only big for a few people. Those people are usually the owners and early investors in the respective company.

Also consider the fact that many big IPOs underperform. Even if you go out of your way to invest in a mutual fund expected to be getting a piece of Facebook, it won’t necessarily translate into big bucks. In fact the odds are that you’ll come away with a very modest increase in your money at best.

So despite the warnings (and there are plenty of them), if you’re still interested, these are you best options:

Mutual funds

There are approximately 50 mutual funds that own shares of Facebook, and they include Morgan Stanley funds Focus Growth and Capital Opportunity, T. Rowe Price funds New Horizons and Global Technology, and Fidelity Advisor New Insights funds.

SecondMarket

You can buy private company stock through this service after qualifying as an “accredited investor” (one of the requirements is that you make more than $200,000 a year or have at least $1 million in assets). Then you just have to troll the site and hope to find someone (or something – sellers are usually firms or organizations of some sort) trying to sell Facebook stock. If or when you do find Facebook shares for sale, expect them to be expensive. Also look into other options like SharesPost and Nyppex (which is invite only).

What about When?

The Facebook IPO adrenaline is pumping right now, and investors are in a frenzy. If you believe that Facebook is going to trump Google with its final valuation when it goes public in April, then the answer for you is to get your hands on stock as soon as possible because you think it’s only going to skyrocket.

If you have a little more doubt and subscribe to the tech bubble theories, then you’ll want to hold off. Some investors think watching how those who purchased stock earlier are acting is a good way to judge how it will perform.

The message you should take away from all of this? Don’t get swept up in the lure of the mythical Facebook IPO, and don’t get overwhelmed by warnings of a tech bubble. Either way, if you aren’t a member of the elite, you’re probably going to sit on the sidelines for this one.  

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