This Friday Facebook`s long expected IPO is finally happening. The initial valuation will likely be around 100$ billion dollar.
I was lucky to buy my Facebook stock much cheaper in 2010 on the secondary market - and I will sell most of it soon after the IPO (on the secondary market again due to the 6 month lock up for my shares).
During the last year I`ve written 3 articles on different strategies how you can profit from investing in Facebook or their IPO:
Here`s now a short term “tactic” for the last minute – possible for everybody who owns already a stock depot:
Buy Google stocks now before the IPO – they are relatively undervalued and will rise when people compare Google`s value to Facebook!
Given the strong investors demand (and a 900m user base) it`s likely that the price will jump 20-50% within the first minutes /hours after the IPO.
That means Facebook`s valuation could reach 120-150$ billion dollar.
Even though I believe in Facebook`s longterm potential to be worth much more in short term they are relatively overpriced – at least compared to Google.
Google has today a market cap of $200 billion and a Price/Earning Ratio around 19 while they are still continuously growing.
Moreover they have plenty of cash in the bank – if you calculate that out their P/E ratio is even much cheaper.
Facebook will at a valuation of 120-150$ billion have a Price/Earning Ratio of 120-150.
While Facebook is growing faster than Google they are – at least in the short term – not fair valued when Facebook is worth 60-75% of Google`s valuation.
When Facebook is realizing the 120-150$billion valuation this Friday people will compare Google and Facebook closely.
There should be 2 effects
1. Google`s stock will rise
2. Facebook`s stock might loose relatively a bit (or not become even more expensive)
Part of the effects should happen immediately. Part of the effect could happen during the following days, week`s and months after analysts had some time to compare.
For the last 3-4 years I`ve more or less always split up my money available for stock investments between Google, Amazon and Apple stocks – sometimes adding some side-investments in smaller Internet stocks.
Before the IPO on Friday I`ve now put for a short time 100% of my stock investment liquidity in Google.
Even though the described effect might only be good for a few percent return – it`s a few percent in a few days or weeks.
Moreover the downside risk is rather low:
Google is “cheap” anyway at the moment even without comparing them to Facebook and the share could easily go up 20-40% during the next 12 months.
If you agree with my opinion, hurry up now. It`s not too late now to benefit from the Facebook IPO – even without owning FB shares.
Since I own both Facebook and Google shares I could (in theory) profit from a significantly higher demand.
Also keep in mind that stock investments are always risky and I could definitely be wrong with my above mentioned opinion!