Facebook (FB), the social networking behemoth that will start trading as a public company this month, has become one of most highly anticipated IPOs to hit the market in recent years. The Facebook investing road show started this week and CEO Mark Zuckerberg made headlines for choosing his usual hoodie over a suit as he and other Facebook executives drummed up support for the company's public offering. (See: Surprise! Turns Out Mark Zuckerberg Is A Great CEO)
When the social networking site officially begins trading on the Nasdaq under the ticker symbol "FB" hundreds of thousands of investors will attempt to get their hands on the stock. The individual investor may have to wait until the dust (and hype) settles, but the question of becoming a Facebook shareholder remains. Is Facebook a smart investment?
The Daily Ticker posed that question to Steven Rattner, the Obama Administration's auto czar and chairman of Willett Advisors, which manages money for New York City Mayor Michael Bloomberg.
"Facebook may be a terrific investment, but I don't think individuals should be picking stocks unless you're a trained professional," Rattner says in the accompanying video. "I do believe individuals should definitely be invested in equities," Rattner says, noting that index funds are usually the best approach for the average investor. "You're not going to beat the market."
Wall Street estimates that the IPO could price between $28 to $35 a share, down from $38 to $40 a share back in April in the secondary market. The company could be valued as much as $100 billion depending how the stock trades at its debut. Facebook says it wants to raise $12 billion from its public offering.
Rattner doubts Facebook stock will wildly miss Wall Street estimates on its first day of trading. "It won't double on the first day and it won't go down by half," he says. Facebook, at 901 million monthly users worldwide and growing, is a "fascinating" company "that will be with us I believe for a very long time."
Facebook's exponential growth and momentum has exhibited signs of weakness. The company reported net income dropped 12 percent in the first quarter from last year and its total revenue fell from the previous quarter. Its first quarter advertising revenue declined three percent from the prior three months. Facebook has not yet been able to monetize mobile usage and doubts over its ability to woo online advertisers with large spending accounts lingers.
But Rattner insists the company will prevail.
"I understand that the revenues are decelerating… I am impressed by the level of revenues they've achieved and the growth of those revenues," Rattner says. "It has a strong hold on its market."
Stay tuned for more Facebook coverage from The Daily Ticker and check out our previous coverage below!