Are You Ready for Facebook’s IPO

Facebook has announced their hotly antcipated IPO.  In fact, it will turn out to be one of the largest tech IPO’s in history.  Investors are chommping at the bit, eagerly awaiting the shares to go public.  Speculation is running rampant?  Will the Facebook IPO be another Google or another LinkedIn?

As an average investor, are you ready for Facebook’s IPO?

Everyone is excited at the prospect of investing and owning a share of one of the hottest social media companies in recent history.  Facebook’s initial public offering will definitely be an exciting financial event.

As a part of their initial public offering filing, Facebook has disclosed some of their numbers.  These are things to keep in mind if you are considering investing in the company.

While they are a hot company, as an average investor, I would be cautious about jumping in.  Most likely, the price will be driven up by the early, favored investors before the normal investors are able to purchase the stock in any event.

However, even without that factor, there are some who believe that Facebook’s IPO may be over-valued.

At its anticipated IPO later this year, Facebook will be three times more expensive than Google GOOG +0.37%   was at its IPO — and nearly 40 times more expensive than the average large IPO of the last four decades.  Mark Hulburt from Marketwatch

While Facebook is on a fast growing trajectory, there’s continuous speculation on whether they can maintain their current pace.  Afterall, one of the most searched for terms on Google is how to delete a facebook account.  If the growth of Facebook slows down, it could turn out to be a precarious investment.  They may not be able to maintain their high valuation.

On the otherhand, there hasn’t been this much hype, backed by a high adoption rate of users since Google themselves went public.  There are many parallels between Google and Facebook.  The small independant tech company growing to take on the giants.

The key to any investment is to do your research.  The Facebok IPO is no different.  With the filing of their IPO, Facebook has disclosed some of their key numbers.  Here’s what we know about Facebook’s financials so far according to the La Times:

Facebook Inc. filed papers Wednesday with the goal of raising $5 billion in a public stock sale that could come in May. The offering would be the largest among Internet companies, eclipsing Google Inc. in 2004 and Netscape Communications in 1995. Depending on demand, the company could be valued between $75 billion and $100 billion….Revenue in 2011 surged 88% to $3.71 billion. About 85% of that revenue came from advertising. Net income rose by nearly two-thirds to $1 billion.

Despite all that, Facebook still faces a tough road ahead. This is a company to keep a cautious eye on.  While Facebook does have potential to grow, it could also have potential to be a huge bubble that could burst at any moment.   

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About Richard  (243 Posts)

Richard is a full time professional, husband, father and blogger juggling all the responsibilities of life and running a blog. Richard enjoys writing about life and online money matters.