Jeff Sica, a financial adviser in Morristown, N.J., for months has been hearing the same request from clients and it isn't about which muni bond looks the most promising these days. It is all about Facebook Inc., and whether regular investors can get in on its coming IPO. But so far Mr. Sica hasn't made any promises, worried that his firm may not receive a single share of the social-media giant, despite being a client of one of the deal's underwriters. "It's just not that easy to get a piece of a hot IPO," he says.
Across the country, it has become Mission Impossible for countless financial advisers: trying to nab an investment in the most highly anticipated initial public offering in recent memory. But while most clients will be disappointed, financial advisers and planners are looking for ways to soften the blow with at least some indirect ways to be part of the Facebook action.
It helps to be wealthy. So-called accredited investors those with a net worth of more than $1 million (excluding their primary residence) or an annual income over $200,000 for the past two years can buy shares of private companies at online marketplaces such as SharesPost and SecondMarket. (Trading in shares of pre-IPO Facebook at both sites halted on March 30, at the request of the company, so that it could set its IPO price range.)
But that hasn't stopped advisers for smaller clients from trying to get into the game, by investing in mutual funds that own slices of private companies. Indeed, the list is fairly large. T. Rowe Price (TROW)
There also are publicly traded companies that invest in private firms before they go public. GSV Capital (gsvc) Corp.,
Despite all the excitement over Facebook's IPO, which is expected to value the firm as high as $96 billion, investing in such deals is fraught with risk, says Matt Reiner, chief investment officer for Capital Investment Advisors in Atlanta. Over the past year, several headline-grabbing debuts from tech companies have disappointed investors. Online radio service provider Pandora Media (P) Inc.
Still, for those investors determined to buy shares after the IPO, advisers recommend sticking to some guidelines. For starters, consider keeping the bet small and not buying at the open, since shares often soar early, says Matthew Andrews, portfolio manager at Private Capital Advisors, a Manhattan-based wealth management firm. In fact, Mr. Andrews suggests waiting a few weeks before considering a purchase or even six months, when insiders can first sell off some of their stakes, according to restrictions set by the company.
Meanwhile, it appears Facebook is working to expand the number of shares it makes available to retail investors. According to its updated IPO prospectus filed last week, the social-media company added E*Trade Financial (etfc) Corp.
At least one other discount broker, Charles Schwab (schw) Corp.
Another option, says financial adviser Robert Russell in Dayton, Ohio: buying shares of publicly traded companies that create apps for Facebook, including social gaming app developer Zynga (ZNGA) Inc.