Why a Fast Facebook Move May be Worth the IPO Penalty
The gap between the expectations for the upcoming Facebook IPO are as wide as ever on Wall Street. For months, experts and bloggers have been declaring everything from it being a sure thing to being the worst investment in tech history. The buzz alone is worth making it a consideration for most, but how many big investors will pull the trigger for a long-term play?
For the lighter investors, this may be on opportunity to make a quick buck, enough of an opportunity to make a penalty worthwhile. Most major brokers put a 30-day rule into effect for IPOs; if an investor decides to sell in the first 30 days, they will not be able to invest in an IPO for 6 months or longer.
With Facebook, the roller coaster that is bound to happen may be worth the penalty.
The stock will open in the $30s and hit several peaks and valleys over the first month. Every bit of news coming from analysts and Silicon Valley itself will ripple across the share prices, but it's very likely that even the valleys will be higher than the launch price for the first 30 days.
After that, it's anyone's guess but the risk goes up dramatically... as does the potential for reward. There is always the chance of big news that rocks the share prices in either direction, but with Facebook the chance is great. With $10 billion infused into their infrastructure they will not be able to sit still. Despite declarations that Instagram may be the only big purchase they make for a long time, there is a strong likelihood that they will do something huge in the next 6 months.
They could buy Yahoo. They may even make a play for Bing. Both scenarios are unlikely and would not help share prices in the short term, but the worst thing they could do is to buy nothing. Going nowhere is going backwards on Wall Street.
What does all this mean for investors? For the sub- or low-6-digit-investors, there's a quick buck that can be made. Despite the penalty, the returns could be very high in the short term. It's not the type of investment that deserves a second mortgage but those who can afford the risk may consider a quick-in, quick-out move.
Long term, there may be too many questions for anyone other than serious investors.
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