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Experts caution on Facebook IPO frenzy
As the shares of social networking giant Facebook begin trading on the NASDAQ exchange today, experts believe that the stock is overpriced at $38 apiece and one must wait for now to invest in the firm.
NYU Stern School of Business Finance ex-Professor Kenneth Froewiss said that adding Facebook to a portfolio early on is risky for experienced pros and investment amateurs alike.
Experts caution on Facebook IPO frenzy
"Even for those individuals with above-average net worth, purchasing shares at an IPO, especially a 'hot' one that has been widely hyped, is rarely a good idea," Froewiss said.
He said it is like playing a lottery. "Might someone on occasion reap a tremendous windfall by doing so? Yes, but then again, on occasion someone wins the lottery. That does not make the lottery a great investment in general," he added.
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Experts caution on Facebook IPO frenzy
Facebook made history by launching one of the largest initial public offerings for a technology firm, aiming to raise $16 billion that pegs the value of the world's most popular social networking site at $104 billion.
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Experts caution on Facebook IPO frenzy
The shares would begin trading on the NASDAQ exchange today under the symbol 'FB'. The public offer is expected to close on May 22.
At $16 billion, the size of Facebook's IPO is the third-largest for a US company, with the largest being the Visa IPO, which raised $17.9 billion in 2008, according to Renaissance Capital.
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Experts caution on Facebook IPO frenzy
The current excitement about the company's stock market debut does not guarantee long-term interest or success, experts said.
"In my experience this stock and its IPO has seen more enthusiasm than any other I have seen over my 40 years of investment experience," said Lewis Altfest, CEO of NYC-based Altfest Personal Wealth Management.