One of the biggest and most anticipated IPOs of the year, quite possibly the decade, is ready to hit Wall Street tomorrow, but if you're thinking about buying shares, you're not alone. Not in the least. We encourage those who want to buy Facebook stock to at least try, because although it's difficult to attain, you'll likely be pleased with your purchase down the road.
Even a single share of Facebook stock could be valuable down the line: Apple shares, which traded at roughly $5 some 15 years ago when the company was dead in the water, are now worth about $560. Even if you pay a hefty amount for a single share of Facebook stock, there's a great chance it'll pay for itself in the future, assuming the company has the legs to rebound. Being a stockholder has other benefits: Owners of even a single share of stock are often allowed to attend shareholder meetings, and if the company ever pays dividends, stockholders are the beneficiaries. To top it off, you're dealing with a social network that's proven itself since 2004, and one that could have the legs to succeed in the future, as its CEO (Mark Zuckerberg) is still very young, and so is his product.
If you're looking to get a piece of the action, we're here to help you. But be warned: It will not be easy.
How To Buy Stock In Facebook
First of all, understand this: You want a piece of Facebook, but so does everyone else in the world. This isn't mean to be a deterrent, but you absolutely should know what you're up against. Some of the biggest investors and most serious Wall Street brokers are looking to own even a single share of one of the most influential, recognizable online brands. The competition is that heavy.
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The Easy Road: Before you go digging deeper, give a thorough look at a number of popular online brokerage firms, such as E*Trade, TD Ameritrade, Fidelity, Charles Schwab, ScottTrade, or USAA. If you want a share of stock as well as an official certificate, that may be more difficult; companies are not required to issue official certificates, and companies that already give out certificates -- including OnceStock and GiveAShare -- charge a premium for them. Online brokerages already charge stock commissions to begin with, so a certificate fee, which could cost up to $30 or $40, will make your entire share purchase a pretty hefty one. So if you want stock in Facebook, make sure you really want it.
Open An Account: Peter Kupferberg, a principal at Gofen and Glossberg's investment counseling firm based in Chicago, says that Facebook stock goes first to the preferred customers of the banks underwriting the deal, which includes lead writer Morgan Stanley, followed by JPMorgan Chase, and then Goldman Sachs. Other bookrunners for Facebook's IPO include BofA Merrill Lynch, Barclays Capital, Allen & Company LLC, Citigroup, Credit Suisse, and Deutsche Bank Securities.
If you want to be one of the first people to grab Facebook shares, you should open a brokerage account in one of these firms, starting with the lead underwriter all the way down to Deutsche Bank Securities. But even then, remember that there are already millions of other customers of those firms looking to buy Facebook stock, and they could have more money or clout than you do. Unfortunately, those both play factors into whether or not you get a share on Day 1. In this case, you should only open your brokerage account if the firm can promise you Facebook stock.
Be An Investor: Kupferberg said that after the investment firms distribute their shares, there will be a small number of shares that are left to small investors. Again, you will likely need to be a wealthy and/or influential investor in either Wall Street or Silicon Valley, so this option is not available for most.
Facebook Stock: The Silver Lining Of Unattainability
Facebook is looking to raise about $16 billion for its IPO alone and distribute some 421 million shares on Friday, but most of those shares will go to Facebook employees, followed by big name investors and firms, followed by their customers, followed by other small investors. You may not get a chance to buy stock on the first day, but eventually, the frenzy and hype will die down. It could take several months for Facebook stock to become attainable, as Facebook's public status will be newsworthy for some time, but future stockholders in Facebook could actually benefit from this delay.
In the first few months, it will be interesting to see how Facebook adjusts to being a public company. After Friday, we could learn information about Facebook that makes us love the brand even more, or it could make us despise them. It will be interesting to watch the market in the weeks following Facebook's IPO, just to see what current stockholders do, and also to see how Facebook itself reacts. Those considering to buy Facebook stock in the future can simply observe the process -- without paying anything, of course -- and look to see if the company's value increases, decreases, or fluctuates too heavily. Though Facebook shares may be unattainable, the silver lining is that you can make an informed decision about Facebook stock once you've seen how it performs out the gates. Hell, you may even reconsider if you see that Facebook isn't performing the way you want it to.
Facebook stock will eventually reach the people, and when it does, hopefully the stock price will be a little less inflated. Currently, Facebook is looking to trade its shares anywhere between $35 to $38 or more, but unfortunately, it's likely that hype will drive up stock prices even further. Scarcity only drives demand up, and Facebook stock might be more scarce than Tickle Me Elmo dolls in 1996, or Nintendo Wiis in 2006.
Facebook raised $3.7 billion in 2011 -- an 88 percent jump from the year prior -- and has been evaluated at about $104 billion.