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OMG! Facebook’s IPO!

Investing · May 17, 2012

I’ve been getting a lot of questions regarding “investing” recently. In fact, I’ve never received so many investing-type inquiries. I can’t tell you how excited this gets me. Here’s how the conversation usually plays out:

Donkey: “Hey, I’m thinking about investing some money.”

Me: “Ahh that’s wonderful! I’m so glad you’ve taken the time to put together a thoughtful strategy to ensure a comfortable retirement.”

Donkey: “Wait what?”

Me: “Isn’t that what you meant when you said “investing”?

Donkey: “Oh no. I’m talking about Facebook.”

This is how 90% of my conversations have been like recently. And then it continues like this…

Me: “Oh right, right, Facebook, right. You must have read their S-1 Registration Statement, right!? That shit was crazy!”

Donkey: (Looking slightly confused) “huh?”

Me: “You haven’t read the prospectus?”

Donkey: “What receptipus?”

For those of you donks that I have described above, I have done the due diligence for you. Based on what I know, I’m not buying shares of FB; but that doesn’t mean you shouldn’t be bullish!

Before you “invest” in FB, I want you to consider my summary of their prospectus below:

Key Facts

  • Facebook, Inc. is offering 180,000,000 shares…and the selling stockholders are offering 157,415,352 shares.
  • We anticipate the IPO price will be between $28 and $35 per share.
  • We will list our Class A common stock on the NASDAQ market under the symbol ‘FB.’
  • 901 million active users
  • 3.2 billion “likes” and comments per day
  • 300 million photos uploaded per day
  • “Our mission is to make the world more open and connected.”
Risks
(their words with my commentary in italics)
  • “If we fail to retain existing users or add new users, or if our users decrease their level of engagement with Facebook, our revenue, financial results, and business may be significantly harmed.” (Users increasingly engage in competing products. What if Facebook introduces updates or products which people don’t like?)
  • “We generate a substantial majority of our revenue from advertising. The loss of advertisers, or reduction in spending by advertisers with Facebook, could seriously harm our business.” (General Motors, the country’s biggest advertiser, just announced that advertising on Facebook was not effective. Is this concerning? Maybe a little, but users are more prone to click on clothes than cars.)
  • “Facebook user growth and engagement on mobile devices depend upon effective operation with mobile operating systems, networks, and standards that we do not control.” (Now that Apple and Google have entered into mobile technology, there’s no guarantee that mobile devices will continue featuring Facebook.)
  • “Improper access to or disclosure of our users’ information, or violation of our terms of service or policies, could harm our reputation and adversely affect our business.” (I often hear people complain about the privacy settings changing or “someone I know was fired because of Facebook.”)
  • “Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could harm our business.” (With the government growing everyday, I’m not sure they are all about the open and connected web. A few countries have actually banned Facebook already.)
  • “Our CEO has control over key decision making as a result of his control of a majority of our voting stock.” (Remember – Facebook is still Zuck’s brainchild. He still has a vision which is fantastic but increasing shareholder wealth isn’t his primary concern.)
  • “The loss of Mark Zuckerberg, Sheryl K. Sandberg, or other key personnel could harm our business.” (With all of these tech geniuses receiving monster paydays, what is left to motivate them? What’s keeping this human capital from leaving and creating their own start up?)
  • “The market price of our Class A common stock may be volatile or may decline, and you may not be able to resell your shares at or above the initial public offering price.” (Wait, what? What do you mean the stock price can go down!?!)
Conclusion
What you invest in is ultimately up to you. I just want to make sure you’re armed with info. Will it sky-rocket or plummet? Only the timeline will tell.
Readers, do you “like” Facebook? What’s your status?

Filed Under: Investing Tagged With: facebook, investing

A Blinkin

Hunter, aka A. Blinkin, is the blogger behind Funancials. His experience in banking, lending, payments and investments has earned him the title of "Personal Finance Guru." In addition to helping people with their finances, Hunter enjoys crunchy tacos, open mouth kisses from his 2 baby boys and writing in third person.

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Important Disclosure

I'm a big believer in transparency. As such, you should know that I make money from this blog. Weird, I know. The way I make money is simple: I occasionally link to products and companies that I believe provide tremendous value. If you choose to sign up, I may receive a small payout. This payout comes at no additional cost to you and, trust me, it's small. I'm in no position to quit my day job. Please do not spend any money on these products unless you feel you need them or that they will help you achieve your goals.

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  1. Donks Look at MSRP and Buy Facebook Stock says:
    September 1, 2012 at 2:40 pm

    […] you took my advice to not buy Facebook’s IPO. Hopefully you took my advice to not buy Facebook before the lock-up period. And hopefully […]

    Reply

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Hunter, aka A. Blinkin, is the blogger behind Funancials. His experience in banking, lending, payments and investments has earned him the title of "Personal Finance Guru." In addition to helping people with their finances, Hunter enjoys crunchy tacos, open mouth kisses from his 2 baby boys and writing in third person. Read More…

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