Facebook IPO: When, How To Buy And What Price

Update 5/1: Facebook IPO target date is 5/18

The Facebook initial public offering is going to be an absolute monster. I have been assisting investors directly for over a decade and I’ve never seen interest like this before. That’s saying a lot as I’ve watched companies like Google, GM and Alibaba (just to name a few) go public. While a can’t predict whether or not Facebook will have a wildly successful debut, I can answer some of the most common Facebook IPO questions – when will you be able to buy it? How can you buy it? What price will it be offered at?

Estimating the value of a stock before it goes public is a complicated process and I want you to fully understand how it is accomplished.  For that reason, I will dedicate an entire post on the pricing alone.

WHEN

When will Facebook start trading?  Until 2 days ago, this was an easy question to answer – May.  However, there have been rumors that the IPO date could be pushed back until June. Apparently, Zuckerberg has consumed himself with an onslaught of acquisitions (Instagram and AOL patents) recently and he hasn’t had time to focus on the intitial public offering of his firm. With the massive popularity surrounding this company, this will not be a secret.  As information becomes readily available, you can bet that it will be reported hundreds of times. If you follow me on Twitter, you will receive timely updates.

HOW

Before Facebook begins trading in May or June, some lucky investors will be able to purchase shares at its initial price. Many of you reading this will not be able to take advantage of this method of acquiring the shares, but it’s definately worth mentioning because everybody asks about it.

When Facebook begins trading publicly, it will be trading on what’s called the secondary market. Your average investor can only trade shares on the secondary market because the primary market is not available to them. When a company goes public the traditional way they use a group of investment banks, referred to as underwriters, to help them price their stock, generate interest and ultimately, take them public. Only people with an account at one of these banks and a minimum required balance, will have the opportunity to get their hands on Facebook stock at the primary market level. Now, this is just requirement number one. These underwriters also insist that you have a certain amount of capital invested with them.  After all, they’re going to give you access to an incredibly hot stock before the demand drastically inflates the price.  I don’t know what the exact required capital will be to invest in Facebook initially, but I would guess at least $1.5 million. So much for that idea huh?

For the rest of us, we must wait until Facebook begins trading on NASDAQ under the symbol FB – the tentative May date. A stock rarely begins it’s trading at 9:30 with the rest of the exchange. Instead, the first trade is typically between 10 and 11 am.  During the time leading up to the official open, the Market Makers will get their books in order so that can accurately determine what price to open the stock at. During this time, you can contact your broker and have them enter a limit order to purchase Facebook when it officially opens.

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Comments

  1. Great post. I’ve been looking for a good breakdown of what will happen. I don’t own any individual stock, and wonder if this should be a start. I’d actually be looking for a quick pump and dump. Am I off base here?

    • No John, you’re not off base at all. Day 1 may be a perfect day to trade Facebook and depending on how it opens, I may do just that. However, if I were going to buy and hold Facebook, the best time to purchase may be at the end week 3 or 4.

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