Why Buying Facebook Stock Is for Suckers

Do you really know what you're buying?
By Kevin Spak,  Newser Staff
Posted Jan 5, 2011 1:38 PM CST
Facebook CEO Mark Zuckerberg gestures as he speaks at the Web 2.0 Summit in San Francisco, Tuesday, Nov. 16, 2010.   (AP Photo/Paul Sakuma)

(Newser) – The investment world seems to be going gaga over the opportunity to buy shares of Facebook—or at least, the prospect that uber-wealthy Goldman Sachs clients can now buy shares of Facebook. But Duff McDonald of Fortune wouldn’t do it—and not just because he hasn’t got the requisite $2 million. His reasoning:

  • Someone who knows more than I do is selling: The sale isn’t dilutive—it’s Facebook’s early investors selling their personal stakes. Why would they do that if this was the greatest investment in town?

  • Goldman Sachs: Goldman doesn’t really think the company’s worth $50 billion, it’s angling to handle the lucrative IPO.
  • FarmVille: It’s disturbing that Facebook’s big moneymaker seems to appeal to the lowest common denominator—a recipe for low margins. “You think they’re going to justify a $50 billion market capitalization through banner ads? Are you kidding me?”
  • The secrecy thing: “Important question: Just what are Facebook’s numbers? Important answer: Who the hell knows?” And what we do know—that the company had $2 billion in revenue this year—makes the $50 billion figure look pretty ridiculous.
(Read more Facebook stories.)

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