Blog : Facebook IPO, and Stock Picks

by Peter Leeds on January 30th, 2012

Penny stocks have been returning to form.  After long, drawn out weakness across all penny stocks and penny stock picks, we're finally seeing a return to speculation.  Penny stocks that had been worth at least $2 were sinking towards $1, penny stock picks valued to $4 at least seemed to slide towards $2.  As it applied to penny stocks, people were more worried about the problems in Europe than in getting involved with great penny stock picks and penny stock companies.

It is great to see the majority of these penny stocks having a return to speculative value.  Many penny stock picks are recovering well, and that makes this the absolute best time for investors to get involved with penny stocks.  Our stocks and stock picks are always high quality, and quality always rises to the top.  Short term, concerns and fears can take penny stocks down, but long term, really high quality always rewards shareholders.

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On Wednesday, the much anticipated Facebook IPO is expected to be announced.  This is just the announcement that they'll do the IPO, not the actual IPO itself.  That will come later, the date of which will be explained in the Wednesday announcement.

IPO stands for Initial Public Offering, and simply means that they will issue a bunch (millions) of shares that investors can buy, to get their piece of the company.  By selling millions of shares, at whatever price they decide to initially release them at, the company will bring in billions.  That money goes to the company (for use), and to the founders (to spend on cars and houses and watches, or whatever).

Thereafter, the FB shares are freely traded on the open market, just like any other stock.

Here's how I see it playing out.  If you don't agree with what I'm about to tell you, I suggest you look at EVERY other high profile IPO over the last hundred years.

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Everybody says Facebook is a great idea.  Therefore, it must be a good investment.  Therefore, they'll try to buy into the IPO early, and they'll profit.

Here's what will happen.  Excited investors get involved, driving the already over-priced shares higher.  Then the smart money takes their profits.  Somebody realizes that FB still doesn't make any money.  Somebody else realizes that the IPO price was way too high, and that the price spike on the IPO day took it ever further into overvalued territory.  Profit taking kicks in.  Fast investors might get out in time, long term idealists hang on as the shares sink to below their IPO price.

And oh yeah, people are using FB a lot less.  There is a shelf life of interest which lasts about 4 years or less, so a lot of people are posting to FB less frequently.  Others are checking in less frequently.  FB will always be around... but right now you are witnessing the apex.  The IPO price, and the stock's post IPO price, will represent the peak in FB's presence.

My advice...?  I never give advice.  My opinion?  Stay far away from this whole mess.

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