Heyer Capital, LLC

investment management and timely advice from a local CPA (Fox Valley, Wisc.)

Facebook IPO

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I’m sorry that it seems like rather stoogish to post about the Facebook IPO now that it has already started trading.  However, it’s always a good idea to remind folks that the soundest way to “play” IPOs is to wait for them to trade for a while and form a solid base. (“Gee, thanks Brian. What the heck does that mean?”)

Facebook is trading at $39.61 this instant.  For a much-hyped Wall Street IPO, that’s a dud. But by waiting for a base to form over the next few months, we keep a safer edge in our favor.  We let the market sort out what the stock is really worth, what its prospects really are.  (Especially after the IPO lockup expires and insiders and underwriters can start to sell their shares and after the hype has diminished.)  Golly, maybe $39 is a screaming bargain.  Or its all downhill from here.  But if we wait for the supply and demand for shares work itself out, we’ll can be more confident that if it does burst up from a consolidation in a few weeks or months, the odds are more in our favor than blindly buying the first chance we get.

Everything looks rosy when a company IPOs.  (That’s Wall Street’s job: to separate your money from you.)  It’s your job to be patient and let the euphoria run off and use discernment.

(I hasten to add that, following my own advice, I’m not touching this one with a ten foot pole. Yet.)

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Written by heyercapital

May 18, 2012 at 10:07 am

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