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Lessons From Facebook's IPO

The social network's bumpy first week highlights the dangers of investing in buzz.

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Facebook's (FB) debut on the public market last Friday didn't do much to quell the heated chatter about the IPO. The only big change was that the tone switched from being distinctly positive to distinctly negative. Instead of hearing about the firm's breathless growth, we instead got plenty of reports on the myriad ways that the offering was allegedly mishandled. Investors that jumped in early were likely shaking their hands and licking their wounds, but even those who stayed on the sidelines can learn plenty from the hubbub.

IPOs Can Be Treacherous
Investors had several complaints about the Facebook offering this week. The first was mostly technical. It now seems clear that Nasdaq's (NDAQ) systems were not up to snuff for the huge volume of trades that poured through the exchange. The initial trading went so poorly, there were even rumors this week that Facebook was considering switching its listing to the New York Stock Exchange (NYX).

Bearemy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.