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Facebook IPO: Good investment or bad risk?

Facebook's much-hyped initial public offering promises to be an exciting spectacle when the social media giant goes public this spring. But should you update your status to "shareholder"? The potential rewards from this projected $5 billion IPO are big, but so are the risks.

What's still unknown: the initial stock price that connected buyers will be able to get, not to mention what shares will cost by the time average investors get a chance to buy the leftovers.

A roundup of opinions from fund managers and other investment professionals on just how good an investment Facebook might be:

"The key question is what will the [stock's] valuation be. We'll find out in the road show. If they're making $1 billion a year, I'm not excited about paying 100 times earnings. This is an Internet company. It's not Apple selling 100 million iPhones."

-- Barry Ritholtz, chief executive of research firm FusionIQ, Manhattan.

"Facebook can be a great company, but that doesn't mean its stock won't underperform. Trying to pick out successful IPOs -- that's stock-picking on steroids. It's definitely a gamble, and Main Street investors should stay as far away as possible."

-- Mark Matson, chief executive of Mason, Ohio-based money management firm Matson Money.

"They're nicely profitable at a few billion in revenue. It probably means they will be obscenely profitable once they get to $10 and $20 billion."

-- Kevin Landis, chief investment officer of Firsthand Capital Management, San Jose, Calif., whose funds have a substantial Facebook stake.

"The real money in IPOs is made by the people who are buying stock privately, then selling it in the market and pocketing the difference. The average investor can't get access to that. You need luck on your side. You could be left holding the bag after you buy high."

-- Rob Russell, president of Dayton, Ohio-based money management firm Russell & Company.

"Facebook is competing with some extremely deep-pocketed companies like Google and has a relatively inexperienced management team. It's a high-risk, speculative investment that I'm afraid Mom and Pop are going to put significant sums into."

-- Andrew Stoltmann, Chicago-based securities lawyer and investor advocate.

"The business model's not fully developed yet. Nevertheless, it looks a lot more profitable than I anticipated. With a 48 percent operating margin, that's about double the profitability of Google when it went public."

-- Tom Vandeventer, managing director of Tocqueville Opportunity Fund, Manhattan.

"If you can own the stock for an intermediate term, I suspect you will make money. Remember, when Google went public, the stock was valued at roughly $27 billion in 2003. It reached almost $200 billion by 2007. With Facebook, you have a very high-growth, early-stage company that has a profitability model that will be very similar to Google's."

-- Christopher Baggini, senior portfolio manager, Turner Titan mutual fund, Berwyn, Pa.

"There's a group -- hedge funds or other large investors -- that will buy all the social media issues because they don't know which one will be the next Google. Looking back on the Internet days of the '90s, one Google will pay for 100 Pet.coms."

-- Jack Ablin, chief investment officer at Harris Private Bank, Chicago.


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