As the hours dwindle down until the most anticipated IPO since that of Google (GOOG), investors are left to only ponder the extent to which Facebook (FB) will surge when public trading begins. Never perhaps in the history of finance has a company been so assured of monstrous investor interest. However, for as green as the initial public offering on March 18th may be, Facebook will still be left with as many obstacles, if not more, as any other company that turns public.
Perhaps the most glaring and disturbing surprise came on the heels of the questionable IPO range of $34-$38 set forth by the company and lead underwriter Morgan Stanley (MS). Weren't these underwriters, after all, supposed to set more aggressive ranges after fallout from the Linkedin (LNKD) debacle in which so much money was left on the table? With Linkedin currently trading well over $100, the mere thought of throwing out a meager price such as $34 at another social networking service seems baffling. That is, of course, unless the underwriters know something ordinary investors don't.
Before throwing your money at Facebook for the long term, also realize the company is mired in a landscape not exactly known for its longevity. Take the company's predecessor, Myspace, as the perfect example. Once a website on the rise, the dissipating former giant now most likely isn't even occasionally visited by a major bulk of social networkers. What's to say the same thing can't happen to Facebook some day? If the turnover rate on many technology giants has surprised you in recent years, expect even greater volatility in the social networking sector.
Above all, it is also important to keep in mind that even Facebook suffers from that dreaded word that often times haunts the business community: competition. For as many times as you've seen that well known Facebook logo on television or online, you've also probably witnessed the Twitter logo nearby just as often. Blame it on the ever changing landscape that defines the business or the fact sending tweets to all-star athletes or Hollywood icons simply entices the average person, but Twitter is without a doubt cleaning up significant market share. So much so, that the thought of joining Linkedin or Facebook in going public isn't even being considered by the company's top executives.
"We don't see any need or urgency to even think about that stuff," Twitter CEO Dick Costolo said in regards to the company coming to market.
Now if it proves possible, for however short a time period, to grab shares of Facebook under $50, the offer would just be too sweet to pass up. The company, for now, is simply worth more. Still, it may prove just as beneficial to cash out later on in the day instead of shooting for even stronger returns down the line. After all, despite all the speculation and excitement, there's just something inside that tells me to take the money and run.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.