Facebook, the largest social media of the world has recently taken a historic decision to enter the stock market. Seriously, it’s not a joke. In the month of February, Facebook did all the paperwork formalities with SEC (Securities & Exchange Commission) in order to begin the course of action in an IPO (Initial Public Offering). However, the average individual investor will initially find it almost impossible to start with IPO when trading of the stock begins.
Investment banks having the responsibility to handle Facebook’s transactions look after themselves, their esteemed customers including the mutual funds before any ordinary small investor can buy the shares.
Now the reason why it is difficult for individual investors to buy the shares of Facebook at a reasonable price is that, IPO price of shares is fixed by both the investment banks and the company together and is pre-sold one day before the market is hit by the common stock of the company.
When Mark Zuckerberg along with his investment bankers set the final deal a few days before the trading commences, the initial low prices will be received only by the investment bankers and their valued clients. Generally, in the initial stage it is usual to see the price of IPOs rising significantly after the company becomes known publicly.
Therefore, the recommended way to buy the shares is by utilizing an IPO mutual fund or exchange traded fund suitable for all types of investments. Also, investing will be more fruitful after the dust gets settled.
