Like to get shares of Facebook? Ask your friends
CHICAGO — Hoping to get in on Facebook’s hotly anticipated public stock offering? You’ll need Facebook friends at very high levels — or a lot of money.
Want to invest? Consider these
IPO SHARES: Facebook and its early investors are selling more than 337 million shares, but those shares are parceled out carefully.
Typically, individuals get to buy no more than 10 percent to 20 percent of shares sold at the offering price. The majority will go to company insiders, institutional investors, the underwriters selected to handle the process and preferred clients.
ELIGIBILITY: The big online brokerages have been taking formal requests from customers for Facebook’s initial public offering.
They anticipate they’ll get their own allocations from one source or another, such as one of the underwriters. E-Trade, Fidelity Investments, Charles Schwab and TD Ameritrade, among others, have been fielding abundant queries.
But the requirements they set on who gets them eliminate most small investors. For example, Fidelity said customers should have $500,000 in their accounts and have made 36 trades in the last year to be eligible. Even meeting the requirements is no guarantee of getting shares.
OPEN MARKET: It will be easy, but expensive, to buy shares on the open market. Open and fund an account with a brokerage. Then for a transaction fee, you can buy Facebook stock at whatever price the market demands.
Be aware that the price could jump significantly by the time you place your order. Investors buying on the open market miss much or perhaps all of any first-day “pop.”
For investors buying at the offer price, Facebook is likely to produce a gain on the first day. But once it starts trading, investors should think of it as just another stock that’s as likely to go down as up.
EARLY BIRDS: The only sure winners will be Facebook employees and venture capitalists who invested in the company when it was private. Mark Pincus, a Facebook investor since 2004, stands to make up to $35 million.
“The time to buy Facebook was five years ago,” he said.
Most people who like the idea of owning Facebook’s stock will have difficulty getting it at the offer price, currently expected at $28 to $35 a share. Unless you know the right people at Facebook, you’ll likely need to have a large, active account with one of the big banks or brokerage firms directly involved in the stock sale.
Otherwise, you can take your chances by buying shares after the initial public offering is completed, when Facebook begins trading on the Nasdaq Stock Market under the ticker symbol “FB.” That’s likely to happen Friday.
Doing it that way typically means paying much more for the stock, however. And heavy demand skews the early stock price, leaving an investor vulnerable to the risk of a big drop.
Jerome Cleary isn’t deterred. One of a legion of Facebook fans, he has never wanted to own a stock as much as he wants to buy this one. Cleary, a standup comedian in Los Angeles, said he has already signed up for an account with a discount online brokerage so he’ll be ready.
“I know you should buy stock in what you know and like,” Cleary said. “I feel that because they have an incredible mass of wealth and such growing popularity, the stock really may pay off.”
Facebook’s IPO is expected to be the largest ever for an Internet company. It’s expected to raise as much as $11.8 billion for Facebook and its early investors — far more than the $1.67 billion raised in Google’s 2004 IPO.
Analysts said there’s so much interest in Facebook’s stock that some underwriters are closing their books as early as today. This means they won’t take any more orders from potential buyers. The IPO is expected to be completed late Thursday, with shares available for trading Friday.
Scott Sweet, the owner of advisory firm IPOBoutique, said the high demand also means that Facebook might raise the per-share price above $35, the high end of the range Facebook currently expects.