As many people have probably noticed, there has been significant buzz and speculation flooding the blogs and news sites over this upcoming Friday's release of Facebook's IPO on the Nasdaq. Many financial pundits predict catastrophe and a second dotcom bubble bursting in the market, and expect Facebook's performance to mirror the struggles that have crippled recent tech companies that entered the market over the past 12 months (Groupon & Netflix). A few, on the other hand, see Mark Zuckerberg's darling of the Internet as a stock that could pop like Google did.

Whether you are avoiding the IPO altogether, aiming to try and buy a few shares at the retail level or simply sitting on the sidelines observing Friday as a historic day for the tech industry (as the IPO will be the largest one released in history), May 18 will unmistakably see some interesting activity, with the following likely to occur.

SEE: Evaluating The Facebook IPO

Price Surge
Unless you're rubbing shoulders with major underwriters and have bought pre-IPO stock, or have a few million lying around in your investment account waiting to be invested, it will be incredibly difficult to purchase shares of Facebook as a regular investor when it immediately hits the market - especially at $28 to $35 per share.

When LinkedIn released its offering to the public, it saw market volume within the millions, and after its shares were released at $45 a pop, the stock's price surged to above $100, before settling on $94 at close. Investors bidding for the stock on that day, hoping to grab the initial offering price, saw ask prices swiftly move north as the day progressed. Undoubtedly, an IPO as prolific as Facebook will see similar movement.

SEE: Alternative Ways To Invest In Facebook

Noise Trading
Due to its household name value, Facebook will also likely attract inexperienced investors who want to get in on the action at the discount brokerage level. Earlier this month, E-trade was added as the 33rd underwriter for the IPO, allowing clients with smaller assets, many of whom may be less-sophisticated investors, to hop on the bandwagon. It also gives day traders the ability to dive into the fray, causing significant amounts of noise during the first trading day. Traditionally, noise traders are often associated with price escalations leading to a bubble, forcing the price of a stock to deviate beyond its fundamental value. For a company with a name as ubiquitous as Facebook, it goes without saying that there will probably be a few noise traders in the mix.

SEE: How Facebook Beat MySpace

Large Volume
There will be numerous players vying for position to cut a slice out of the social media giant, with funds and high net-worth individuals the most visible contenders for the company. The hype behind the IPO will likely cause significant movement in the stock's volume of outstanding shares, as Facebook insiders cash in their shares in the company and release them to the public. Among the individuals who will be scooping them up include Apple co-founder Steve Wozniak, who stated during an interview with Bloomberg this past weekend that he plans on buying shares of the company, regardless of price. Expect to see a record-breaking volume of shares exchanging hands later this week.

SEE: 6 Career-Killing Facebook Mistakes

New Millionaires and Billionaires
Insiders at Facebook include not only Zuckerberg and the venture capitalists who helped start up the company, but celebrities, employees and contract workers who helped the growth of the site. Graffiti artist David Choe, who was commissioned to paint the murals adorned in Facebook's Palo Alto offices, chose stock over a cash fee for his work. When the company hits the markets, the stock compensation Choe accepted will net him approximately $200 million. Moreover, U2 front man Bono possesses a stake in Facebook that, when the IPO hits the market, will be worth up to $1.5 billion - more than he ever earned during his musical career.

SEE: The 5 Biggest Investors In Social Media

The Bottom Line
Valued at nearly $100 billion, Facebook's IPO is tentatively worth close to half the market cap of Wal-Mart and more than the capitalization of Disney. Whether or not Facebook will live up to its hype, the fact remains that this week will be a tremendous event in the history of the IPO market.

Related Articles
  1. Chart Advisor

    Now Could Be The Time To Buy IPOs

    There has been lots of hype around the IPO market lately. We'll take a look at whether now is the time to buy.
  2. Investing

    4 Billionaires Who Dropped Out of Harvard

    People who became successful despite dropping out of Harvard University.
  3. Stock Analysis

    GoPro's Stock: Can it Fall Much Further? (GPRO)

    As a company that primarily sells discretionary products, GoPro and its potential falls right in line with consumer trends. Is that good or bad?
  4. Stock Analysis IPO: Is it a 'Buy' or Should You Pass?

    Demand for relationships is always high. Now you will have a way to directly invest in the relationship market. But is it priced fairly?
  5. Markets

    4 Companies That Made Billionaires Poor

    Learn how four once-successful companies in the stock market lost their way, and how these companies turned billionaire investors poor.
  6. Markets

    Top 6 Apps for Financial News

    Understand why real-time financial information is so important in today's business environment. Learn about the top six financial information apps.
  7. Stock Analysis

    Toys 'R' Us Stock Doesn’t Exist: Here is Why

    Learn why investors cannot trade stock in toy retailer Toys 'R' Us. This privately traded company could be a hot IPO candidate for the future.
  8. Stock Analysis

    If You Had Invested in Qualcomm Right After Its IPO

    Find out about how much you would have if you had bought 100 shares of Qualcomm during its initial public offering and the amount you would receive in dividends.
  9. Stock Analysis

    EMC's 2 Key Financial Ratios

    Read about some key financial ratios for EMC, including revenues and trading ratios. Learn about how EMC has a major ownership interest in VMware.
  10. Markets

    Why Are Companies Taking Longer To Go Public?

    Learn why private companies are waiting longer to have their IPOs. Understand why it may be more advantageous for a company to stay private.
  1. When did Facebook go public?

    Facebook, Inc. (NASDAQ: FB) went public with its initial public offering (IPO) on May 18, 2012. With a peak market capitalization ... Read Full Answer >>
  2. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  3. What kind of assets can be traded on a secondary market?

    Virtually all types of financial assets and investing instruments are traded on secondary markets, including stocks, bonds, ... Read Full Answer >>
  4. Why would a company decide to utilize H-shares over A-shares in its IPO?

    A company would decide to utilize H shares over A shares in its initial public offering (IPO) if that company believes it ... Read Full Answer >>
  5. How do I place a buy limit order if I want to buy a stock during an initial public ...

    During an initial public offering, or IPO, a trader may place a buy limit order by choosing "Buy" and "Limit" in the order ... Read Full Answer >>
  6. How do corporate actions affect floating stock?

    Corporate actions, defined as a company's actions that affect the amount of outstanding company stock shares, can either ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  3. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  4. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  5. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  6. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
Trading Center