Breakout

Facebook Frenzy Squeezes Main Street Investors Out of IPO

Jeff Macke
Breakout

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Unleash the hounds! Facebook's (FB) first day of trading can no longer really be characterized as just an IPO. Despite an increase in both the number of shares being sold and the price at which they're being offered, Facebook shares are getting snatched up as fast as they can be printed. The official price for FB shares was just set at $38 each, giving the company an implied valuation of $104 billion --the largest valuation ever for a U.S. company during its IPO.

Unfortunately, individual investors can forget about paying $38 a piece. Retail brokerages don't have any more shares available for the public at the insider price, leaving the rest for so-called institutional investors. If you're waiting to get Facebook stock at the same price as the big guys, you're going to be disappointed.

TD Ameritrade (AMTD), Fidelity, and E*Trade (ETFC) are just a few of the retail brokerages that had to stop taking buy orders earlier this week.

The Main Street frenzy and opening trade "pop" are just a matter of numbers, according to Anthony Scaramucci, author of The Little Book of Hedge Funds, and managing partner at SkyBridge Capital. "There's 901 million users," Scaramuccci says in the attached video. "If 10% of those users have an interest in the stock, this thing will trade a double, possibly a triple, on the opening just in terms of people putting in market on open orders."

Yes, Scaramucci is suggesting Facebook could start trading somewhere around $100. That's exactly why he would urge anyone tempted to lunge into the shares at any price to reconsider. The smart money, or at least the investors generating enough brokerage commissions to get Facebook shares, "are pitching their shares back into the public," hoping to take advantage of the little guy.

Whether Facebook ends its first day of trading as a double, triple, or even lower than that price, will only depend on the terms of what the insiders are paying for their shares.

Those looking to own Facebook stock tomorrow would do well to heed the advice Scaramucci says he'd give his own mother: "No, Ma, do not buy any of that stock."

At least not right away... Are you planning to buy Facebook (FB) shares within the first month of its IPO? Please answer our poll question below and visit us on Facebook!

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