Is the Press Pumping Facebook’s IPO?

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This morning I read an article on CNN with the headline, “Seniors clamoring to invest in Facebook IPO.”

Of all the silly articles written about Facebook’s impending IPO in an effort to draw readers to news websites, this one has to be the lamest. So of course I read the article.

It turns out the article’s headline is not lame–it’s completely misleading.

Apparently 79-year old Alvan Sweet told CNN that Facebook’s IPO is “one of the hottest topics” in a retirement community in Boyton Beach, Fla. It’s so hot, in fact, that three (yes, three!) of Sweet’s friends have been badgering Sweet to help them get in on some IPO shares. Sweet, as it turns out, has been investing in IPOs for some time.

But Sweet has no intention of investing in Facebook this week. According to Sweet, recent IPOs like Groupon may rise at first, but then have difficulty maintaining their price. So Sweet ain’t “clamoring” for Facebook shares. And his three friends who do want in on the IPO refused to speak to CNN or identify themselves.

So maybe the article headline should have read, “Three unidentified seniors in south Florida are clamoring to invest in Facebook, but their friend who is an IPO investor won’t touch the social media giant with a ten-foot pole.” Probably too long.

And if ridiculous articles like the one on CNN weren’t enough, Facebook has actually raised the price of its IPO shares (with the press pumping the stock, why not?). This Friday Facebook will begin trading under the ticker ‘FB’ on the Nasdaq. It prices its shares the night before. Recall that I wrote last week about how Facebook is not worth $100 billion. Well now they’ve decided to raise the price of the shares from a range of $28 to $35 to a new range of $34 to $38. I assume CNN does not get a commission.

And that brings me to 11-year-old Jade Supple. The WSJ reported that the IPO “excitement has drawn in fledgling stock buyers such as 11-year-old Jade Supple of Rockville Centre, N.Y., whose father plans to bet money saved to put his daughter through college on Facebook shares, although he has doubts about the price.”

Think about that. Of all the possible investment choices, this poor girl’s father is going to “bet” his daughter’s college fund on Facebook even though he has “doubts about the price.” I hope she pays attention, because this investment could be the best education she gets in a long time.

And for those of you still thinking of buying into the IPO, I’ll leave you with the words of Warren Buffett:

We never buy into an offering. The idea that something coming out…that’s being offered with significant commissions, all kinds of publicity, the seller electing the time to sell, is going to be the best single investment that I can make in the world among thousands of choices is mathematically impossible.

Published or Updated: May 15, 2012
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Ryan says:

    Buffett said it best, in my opinion. I have no plans on investing int he IPO either. It may turn out to ne the next Google (initial offering price of $85, now trading at around $600), but it may also fall or remain stagnant. I prefer to invest in more traditional mutual and index funds, or in companies that have a longer track record (and preferably offer dividends). As for the guy betting his daughter’s college fund – that just reeks of desperation. It’s never a good idea to rely upon a home run to reach your savings or investing goals.

  2. Gail says:

    Most of the people I know wouldn’t consider it for 2 reasons.

    1. They think it’s grossly over-priced.

    2. They think it will fade away like My Space and others. Most have already abandoned it. It’s not worth the security risks and it’s a waste of time.

    Facebook claims to have millions of users, but there are multiple accounts for the same person and for scammers. Many accounts are not used or totally abandoned. As we mature we find it to be a silly waste of time. So we think it will go down almost as fast as it has gone up.

  3. jim says:

    I think the press is covering the IPO more than warranted. But the press over covers almost everything now. Facebook IPO is a pretty big news story, so its not unwarranted for them to cover it. I think we really don’t need 24/7 news across 10 news networks and having it tends to create far more news coverage than we need.

    I don’t think the media is purposefully trying to artificially inflate the stock price by hyping it. I think they’re just doing their job by filling 24 hour news cycle with whatever seems noteworthy, then beating that topic to death for 20 times as much as needed cause they don’t have anything better to discuss.

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