Tuesday, May 22, 2012

Facebook IPO

Haven't been watching the market lately with Diablo 3 out last Tuesday. I was able to watch some CNBC last week during lunch and dinner, and everything seemed to be about Facebook IPO.

My suggestion? Stay away!

If I had $100 billion in cash (roughly how much Facebook was worth at the $38 IPO price), I would not go and buy all of Facebook. I would prefer to go buy half of all the railroads in north america (CN, CP, CSX, Union Pacific, KSU, etc, all of them!!), or all of Mcdonalds, or BOTH Boeing and Caterpillar. These companies are what make our economy hum, and play an integral part in a global economy. They make things. They ship things. What does Facebook do? Enable people to slack off at work?

I would not buy FB at 100 billion, which is how much Mcdonalds is worth. I would not buy FB at 50 billion, which is how much Boeing is worth. I wouldn't pay 20 billion for FB, which is how much Cummins is worth.

Another issue is I don't like IPOs that much to start with. The fundamental purpose of an IPO is to allow early investors an opportunity to get out, and take profits. They are designed to get maximum price for the given value at the time, which usually tends to result in overvalued IPO offering prices.

I'm sure there are other folks who think Facebook is worth much more than what I think it is worth, and  that's what makes a market. For me, I will stick to my boring businesses and avoid exciting stories like FB.

1 comment:

  1. FB was all over the news last week when it went on sale on the market. People were giddy with excitement. I wanted to make a quick buck or two as well... it only ended up being under $20. I missed my opportunity. But it's probably a good thing to stay out of it...instead of lurking around.