The news has been full of reports about the initial public offering (IPO) that has been filed by social networking site Facebook in recent days. Many people are now considering buying shares in the company to try and make a quick buck on the back of its success. But is it such a good idea?
Last year Facebook earned $3.7 billion in revenue
This is an impressive statistic on its own. But it also represents a massive increase of 88% compared to the previous year. The question is whether these figures should inspire people to invest in shares issued by the company or not.
Are IPOs worth investing in?
In truth there won’t be an opportunity for you to even consider investing in Facebook shares for some considerable time to come. Just under a third of the shares are owned by people working for Facebook, all of whom will benefit hugely in a financial sense by the IPO. But the rest are all spoken for as well, so there is little chance of buying Facebook shares in the immediate future.
Furthermore history tells us that there is an approximate fifty-fifty split between those IPOs that produce good returns and the ones that don’t produce any appreciative returns at all.
Do your homework
You can see then that there is never a sure thing when it comes to shares or IPOs. The mistake many people make is to jump straight on the bandwagon when shares like these become available. Facebook is a huge company to be sure; it is the biggest and most successful social networking company in the world.
But the landscape can change very quickly in this area. We only need to think back to the fate of MySpace to realize this. It was once a very successful social networking site but is now a shadow of its former self. It seems unlikely that the same fate could ever happen to Facebook, but then we may well have said the same thing about MySpace just a few short years ago.
No such thing as a sure thing
In truth if you are considering investing in Facebook shares at some point in the future, you should do your homework just as you would with any other investment. Consider all the facts and figures and make an informed choice about whether the share value (whatever it might be) is likely to appreciate still further during the time you will hold them for.
We would all like to have a slice of the Facebook pie. But in reality the only people who are almost certain to become millionaires or even billionaires off the back of the IPO are those who work for the company. The people who are most likely to lose out are those who invest in the hope that they will make a ‘guaranteed’ fortune – only to realize there is no such thing. There may well be those who buy Facebook shares in the future and make a profit – but they won’t have done it on a whim.
Image Source: http://facebook-ipo.net