You must have heard that Facebook (FB) will issue its IPO shortly, probably in Jun this year. There is a lot of ballyhoo about that and I'm pretty sure that FB will get what it wants, a $100 billion price tag as its underwriting banks are pushing. No question, FB will be THE most successful IPO in the history and many people will like it and would to jump into its boat, hoping to become rich quickly. Will you?
I remember a few years ago when Google issued its IPO, my wife asked whether we should also buy some Google's shares. I didn't. Back then, I was much less savvy about investment and I thought Google must be very expensive around the time of IPO. Of course I was wrong and I'm still kicking myself now. So will I buy FB's shares now when it is trading on the market? No way!
At a market cap of $100B, FB will be trading at 27 times its sales and 100 times its earnings! At IPO, Google was trading at 10 times sales, more than half cheaper! In other words, in theory, you will need to take 100 years to expect FB to return your investing money based on its earnings. What a fool's game!!
Of course FB is a great company and has created a totally new networking model. Its glory may at least last for a few years. But I really think it is stupid to put your money into it at this price. Maybe I would consider when it drops down by 50%.
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