Should you buy stock in Facebook?

INDIANAPOLIS (WISH) - From a Harvard dorm room, to the Nasdaq trading floor, Friday we learn how much the ultimate social network is really worth.

Facebook’s stock is set to begin trading on the Nasdaq Stock Market on Friday, the day after the social network raised $16 billion in an initial public offering that valued the company at $104 billion. The total makes it worth more than Amazon.com, Walt Disney and McDonalds.

“An initial public offering means a certain number of people are offered the opportunity to buy Facebook before today,” said WISH-TV Personal Finance Expert Peter Dunn on Daybreak Friday. “So, you and I have to wait until the bell rings and it goes to market and then buy it at whatever price it comes in at, and I wouldn’t be surprised if it jumps very fast and people have to buy at a higher price.”

Facebook priced its IPO at $38 per share on Thursday, at the top of expectations. Now, regular investors will have a chance to buy stock in Facebook for the first time. The stock will trade under ticker symbol FB.

As it is, Facebook has more than 900 million users – making it one of the most widely used privately held companies to ever go to market.

“There’s never been a company that more people know so much about,” says Dunn. “So you think ‘I use it all the time, so investing in it has to make sense,’ but you just can’t base it on what you use.”

Comparing to others

Some of the most well known online companies have seen less than fantastic results as they have gone to market. Groupon stock is down 53 percent since its initial public offering in 2011. Yelp is down 15 percent and Pandora is down 38 percent.

Consider what happened after last year's IPO of LinkedIn, an online professional networking service that is probably the closest thing Wall Street has seen to Facebook's social network.

LinkedIn's shares rocketed from $45 in its IPO pricing to $122.70 within the first few hours of trading. A year later, the stock hasn't touched that price again. But a month after the IPO, patient investors were able to snap up LinkedIn's shares for under $64. The stock has bounced back above $100, now that LinkedIn has proved it can be more profitable than analysts anticipated.

All about profits

Maintaining profitability is the main concern for investors, which is why, Dunn contends, that insiders have been selling off their shares leading up to the opening bell.

“Some of the insiders are putting up their shares for sale on this Friday and some people are speculating this stock won't be worth as much 90 days from now. Because if they sell that stock now, they get the cash now. If they hold on to it they have to wait between 91 and 211 days. So that tells me it may not be as high 90 - 211 days from now.”

In terms of whether Facebook can continue to grow, the Associated Press reports there are countries where the social network hasn’t infiltrated:
“Facebook still has plenty of room to grow, particularly in developing countries where people are only starting to get Internet access. As it is, about 80 percent of its users are outside U.S. and Canada.”

According to a recent Associated Press-CNBC poll, two out of every five American adults have not joined Facebook. Other findings of the study:

• Some people don't join the social network because they don't have a computer or Internet access, are concerned about privacy, or generally dislike Facebook.
• Those without a college education are less likely to be on Facebook, as are those with lower incomes.
• Women who choose to skip Facebook are more likely than men to cite privacy issues, while seniors are more likely than those 50-64 years old to cite computer issues,
• About three-quarters of seniors are not on Facebook. By contrast, more than half of those under 35 use it every day.