As you have likely heard, Facebook is set to become a public company on May 18th. With the slew of news stories that have accompanied this story, we thought it would be helpful to provide answers to a few questions related to the filing.
- Can I buy shares of the company? Not yet. The announcement only means that the company’s shares will start trading on Friday, May 18th.
- Can I buy shares at the initial offering price? Unfortunately, we do not have the ability to buy shares at the opening price. Once they start trading on the open market, however, we do have the ability to buy shares.
- How is Facebook similar to Google? This is a common question that we have gotten from clients. While there has been a tendency to view Facebook and Google as similar companies – both because they focus on internet-based advertising and are extremely successful entities – in our opinion there is a key difference between Google and Facebook.
While Google’s current business revolves around advertising on a search engine, Facebook’s business revolves around ads placed on the side of the page when users are logged in. Though that might not appear to be much of a difference, it’s important to keep in mind what each program is used for. When using Google’s search engine, a user is actively seeking something out: a book, a restaurant, etc. Facebook, on the other hand, isn’t a place that people go to actively seek products out; its users mainly go there to look at pictures and see what friends and family are up to.
That’s an important distinction, since the focus of Google’s advertisements should be closely related to the products that its search engine users are trying to track down. Facebook, on the other hand, has to focus on placing ads that are enticing enough to convince its users to stop what they are doing and start shopping for a specific product.
- Is Facebook a good investment for me? The first thing we would recommend is that we sit down and discuss why it does or does not make sense for your specific situation. With that being said, we would also recommend thinking about why you would like to specifically own Facebook stock. It’s important to remember that Facebook is shooting for an opening value that would be 3-4 times higher than what Google was worth when its shares started trading in 2004. While Google has performed extremely well – its shares are up more than 500% since going public – it also started at a much lower value than Facebook is likely to open at.
We hope that helped answer a few questions you may have had. If you would like to discuss any of these items further, we would be more than happy to sit down together and go over them. As always, thank you for the trust you place in us at Wealth Management Associates.
Securities and investment advice offered through Transamerica Financial Advisors, Inc. (TFA). A Registered Broker/Dealer and Investment Advisor Member FINRA & SIPC. Non-security products and services or tax services are not offered through Transamerica Financial Advisors, Inc. Wealth Management Associates is not affiliated with TFA. LD43004-02/12