When social media “giant” Facebook [FB] went public last Thursday, expectations were high; so was the stock price, $38 at the offering.
The following Monday ended with Facebook stock value down 11%. Do keep in mind that there was no trading over the weekend, and a BBC.com report does state that the stock would have fallen as early as Friday, if it wasn’t for the underwriters buying up stocks.
This is by no means a slam against FB, or Mark Zuckerberg. Fact is that I like FB and Mr. Zuckerberg-although I will admit I’m quite jealous of the young man.
What this IPO activity does validate to me is:
- Never rely on pre-IPO company valuations. They are way too speculative, and they are based on hope rather than real figures.
- IPOs of this stature are not for individual investors: Therefore, ignore all the cheer leading the media does prior to the IPO, it’s nothing more than the underwriters trying to rally the Institutional investors with the deep pockets.
- We can always tell a company’s true value by how major investors react to the opportunities to sink their money into them.
I could go on, but as you know, I like keeping things short on this site. The lesson learned here is however: The stock market is too volatile-now more than ever-and small time investors like me need to stay far away from it.
At least until this abysmal economy improves… tremendously.
Until we meet again,
Thomas Ryan- firstname.lastname@example.org