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Opinion: Facebook IPO

On Friday May 18, 2012 Facebook went public and started trading on the NASDAQ stock exchange. The initial evaluation was set at $38/share. Prior to the initial public offering (IPO) some speculated that the initial value could be set up to as much as $45/share.

Between Friday and Monday, friends and colleagues asked me if I was going to buy Facebook stocks or not. I gave them my standard answer,” I buy mutual funds not individual stocks”. Yes boring mutual funds. Not considering my current buying habits, if I bought individual stocks, I would not be ready to buy Facebook yet.

Many people would advise you to invest in products you use and like. Well I use Facebook and I like it. However, the reasons I like Facebook would not make investors wealthy. I like Facebook because it is my escape from the real world. It is my escape from the pressures, stress, monotony, and until a few years ago…… the advertisements. When ads were introduced, it felt like Facebook lost some of its appeal. Since the introduction of ads, I have never intentionally clicked on an ad on Facebook unless there was something being given away for free or at a highly discounted price.

Given my feelings about Facebook, I do not really see it being an effective medium for advertising. I think executives at General Motors feel the same way. It was reported last week that General Motors will no longer advertise on Facebook because their ads weren’t translating into sales.

So what is the true value of Facebook? I do not know at this point. After Facebook started trading, the price dropped below $38/share before closing on Friday barely in the black at $38.23/share. By the close on Monday May 21, 2012, Facebook closed below $38/share. This says the market is saying the $38/share may have been too much. What I do know is that if I was buying individuals stocks, I would not be ready to purchase their stocks. I like the product they have. However, I do not see how they can translate it into enough money for me to be excited about the company yet from an investor’s point of view.

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