What to do with that $500 cash balance burning a hole in my IRA?
Buy Facebook. It ended up being so much easier than they said it would be.
My initial limit order with a maximum price of $45 for 10 shares was placed early this morning after I heard a report on Bloomberg television that Facebook was allotting anywhere from 15% to 25% of its 421 million shares for retail customers, and that lots of average Joes were filling orders for the $38 per share opening price.
A lot of people must have had the same idea, as that order was canceled with a backup of orders, cancellations and changes that delayed Facebook’s open by a full 30 minutes. But at 1 p.m. EST, I resubmitted my order for 10 shares, and within seconds I had confirmation from Sharebuilder that I now owned a very small slice of Facebook.
I got in at $40.94 per share. With the brokerage commission, I have sunk $419.35 into the third biggest IPO of all time.
Disappointing First Day
Why was it so easy to get in? Because it turns out that Facebook as an IPO wasn’t that hot after all, at least from a Wall Street point of view. Facebook still walks away with its $16 billion and its valuation of more than $100 billion, but many people who thought their Facebook shares were winning lottery tickets are disappointed.
Facebook closed at $38.21 today, up just 0.61% and nowhere near the $100 that Bloomberg News was predicting at one point early this morning. The average tech stock finished its first day of trading up 32%, and the average one-day increase among the relatively few social media companies that have gone public had been 42%.
While the volume set a first-day record as analysts had predicted, the volatility was nowhere near what analysts had expected. Facebook never dipped below its original price of $38 and traded as high as $45, but spent most of the day hugging the $40 mark. In the final hour of trading the price started falling as big investors opted to get out before the weekend.
Facebook's lackluster performance dragged down other social media stock prices. Facebook didn't dip below its $38 offering price because of underwriter overallotments that propped up the price, and delays by Nasdaq in confirming orders may have also kept the price down. But by every Wall Street definition the IPO was a bust. Typically, stocks that don't post double-digit gains on their first day of trading take longer to offer returns, if they ever offer returns.
Why I Bought (and Why I'm Keeping) Facebook Shares
Warren Buffett I am not: I have a 401(k) from a previous employer and an IRA which, until today, was divided between (what I am told) is a healthy mix of index funds. I have been covering business for 15 years and about the only thing I know is that predicting the intricacies of the stock market is best left to the pros.
Or left to chance.
But definitely not left to me.
At the same time, there was that $500 that hadn’t yet been automatically invested in the index funds....
This was an experiment, not an investment for me. I’m not concerned that I’m down for the day, and those 10 shares will most likely sit in my IRA for years to come. I know my three-figure investment may one day grow to four, five or even six figures. I also know it may not.
And, after all, I still cover Facebook for ReadWriteWeb. For now, my paltry 10 shares aren’t enough to keep me from being objective, and I’ll continue to be one of the company’s biggest critics.
Of course, if Facebook explodes and eight years from now is trading at about 100 times its IPO price, as Google now is, we may have to reconsider my ability to cover Facebook objectively.
A guy can dream, after all, can't he?