Hoping to get in on Facebook's hotly anticipated public stock offering? You'll need Facebook friends at very high levels -- or a lot of money.
Most people who like the idea of owning Facebook's stock will have difficulty getting it at the offer price, currently expected at $28 to $35 a share. Unless you know the right people at Facebook, you'll likely need to have a large, active account with one of the big banks or brokerage firms directly involved in the stock sale.
Otherwise, you can take your chances by buying shares after the initial public offering is completed, when Facebook begins trading on the Nasdaq Stock Market under the ticker symbol "FB." That's likely to happen Friday.
Doing it that way typically means paying much more for the stock, however. And heavy demand skews the early stock price, leaving an investor vulnerable to the risk of a big drop.
Jerome Cleary isn't deterred. One of a legion of Facebook fans, he has never wanted to own a stock as much as he wants to buy this one. Cleary, a standup comedian in Los Angeles, says he has already signed up for an account with a discount online brokerage so he'll be ready.
"I know you should buy stock in what you know and like," Cleary says. "I feel that because they have an incredible mass of wealth and such growing popularity, the stock really may pay off."
Facebook Inc.'s IPO is expected to be the largest ever for an Internet company. It's expected to raise as much as $11.8 billion for Facebook and its early investors -- far more than the $1.67 billion raised in Google Inc.'s 2004 IPO.
Analysts say there's so much interest in Facebook's stock that some underwriters are closing their books as early as today. This means they won't be taking any more orders from potential buyers. The IPO is expected to be completed late Thursday, with shares available for trading Friday.
Scott Sweet, the owner of advisory firm IPOBoutique, says the high demand also means that Facebook might raise the per-share price above $35, the high end of the range Facebook currently expects. Facebook and the IPO's lead underwriter, Morgan Stanley, declined to comment.
If you're thinking of investing in Facebook, here are some things to consider.
*IPO shares: Facebook and its early investors are selling more than 337 million shares, but those shares are parceled out very carefully, away from the public's eyes.
Typically, individuals get to buy no more than 10 to 20 percent of shares sold at an IPO's offering price. The vast majority will go to company insiders, institutional investors, the underwriters selected by the company to handle the process and preferred clients of all of them.
*Eligibility: The big online brokerages have been taking formal requests from customers for Facebook's IPO. They anticipate they'll get their own allocations from one source or another, such as one of the underwriters. E-Trade, Fidelity Investments, Charles Schwab and TD Ameritrade, among others, have been fielding abundant queries.
But the requirements they set on who gets them eliminate most small investors.
Fidelity, which will be getting an undetermined number of shares from underwriter Deutsche Bank, says customers should have $500,000 in their accounts and have made 36 trades in the past year to be eligible. Ameritrade's account requirements are at least $250,000 and 30 trades in three months. Schwab's are a minimum $100,000 or 36 trades in the past year, but the firm says it also has other requirements.
*Open market: If you strike out as an insider, it will still be easy, but expensive, to buy shares on the open market. Open and fund an account with a brokerage. Then for a transaction fee of as little as $7, you can buy Facebook stock at whatever price the market demand has driven it.
Be aware that the price could jump significantly by the time you place your order. Among last year's hottest IPOs, Groupon Inc. soared in the opening minutes and gained 31 percent on the first day of trading. Zillow Inc. jumped 79 percent and LinkedIn Corp. more than doubled.
Consider this: Groupon, which went public at an IPO price of $20 six months ago, soared as high as $31.14 on the first day. It closed Monday at $11.73, 41 percent below the offer price.