Facebook's IPO: Do not buy

Facebook's IPO will substantially enrich some bankers, venture capitalists, privileged early investors, and early-stage employees--and that's about it. Thinking about buying some stock for yourself? Don't bother--this IPO is not for you.

Facebook just filed to go public after a long, tense wait today, and so it seems like a good time to remind everyone who's not in tech and finance to just forget it's even happening. Facebook's IPO will make some bankers, some venture capitalists, some privileged early investors, and some early employees rich. Everyone else should steer clear.

Mark Zuckerberg: Yeah, he's about to have a good week.
This guy? Yeah, he's about to have a good week. CBS

For one thing, you'll have to steer clear, at least at first. What happened today is simply a filing for a public offering--meaning that you Normals will have to wait months before you can buy Facebook stock, if you can actually get any. When that day comes, though, I'm begging you: do not buy.

As the Gizmodo article linked above points out so well, the common stock (there's a reason they call it that) will only become available after the major investors have stripped all the meat off the bones. You're not going to get the chance to buy low--that privilege is reserved for the one-percenters.

Morgan Stanley President and CEO James P. Gorman. Also going to have a good week.
Morgan Stanley President and CEO James P. Gorman. Also going to have a good week. Morgan Stanley

Meanwhile, there are a lot of reasons investors and financiers are pushing hard for a massive Facebook IPO--reasons that have nothing to do with you and your portfolio. For one thing, the filing is estimated to generate some $500 million in fees for the investment banks involved.

Also, Wall Street needs a win--the hope is that a successful outing will float all boats, attracting nervous investors back to the scary, scary stock market. Even the state of California is hoping for a payday in the form of capital gains taxes.

So, don't get me wrong: a successful Facebook IPO isn't a bad thing: it's the system doing what the system does, and it might even get some potholes filled along the way. But a lot of individual investors may, down the road, be tempted to buy into Facebook thinking that its household name status, like Coke or IBM back in the day, means it's a blue-chip buy--a steal at any price.


A wise man tells me often that you only make money by not doing what everyone else is doing. Even if I could invest in Facebook, something tells me it would only disappoint.


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