Now that Facebook and Twitter have both gone public, what big social media stock will be next? More importantly though, should you buy it and when should you buy it?
Will Pinterest Be Next?
It seems to me that the next high profile company to have an IPO could be Pinterest. They have soared in popularity and are much different than either of the other two social media companies. That is a key: being different than the rest. Of course Pinterest needs to figure out how to make money, but that seems to be a minor stepping stone in the current world of Internet social media IPOs.
Pinterest just recently raised $225 million dollars and from what I have read just started showing ads in September 2013. That means they are busy trying to become a viable business. Admittedly, they are a long way from being able to go public but with all those dollars signs that will inevitably be dangled in front of the owner’s eyes, it might be hard to resist down the road.
How To Buy Pinterest Stock
Just like the IPO’s of Facebook and Twitter, it will be virtually impossible for any individual investors to get in on the ground floor of a Pinterest IPO. Only those who have the right connections or have some long standing relationship with a broker will be able to get shares before the public can.
That means for individual investors like you and I, buying the stock on the open market once the stock goes public will be the only option. To do that you should plan in advance and sign up with a discount stock broker. I use and recommend TD Ameritrade and you can read my review here – TD Ameritrade. They are a great online broker for investors of all levels, including beginners.
What you will need to do is go to the TD Ameritrade website (or choose another reputable online broker), and sign up. Its not hard and shouldn’t take you more than 15 to 30 minutes. After that you will need to put money into the account you just opened so that you are ready to buy Pinterest stock once it goes public. Of course you can buy and sell any other stock as well through your new broker account. To learn more about how to open a discount broker account please read how I did it by clicking the link.
Don’t Buy Pinterest Stock Right Away
By the time the Pinterest IPO happens which would be late 2014 or 2015, investors will have had ample time to see how Facebook and Twitter stock have fared. If they are both down, why would Pinterest be any different? Perhaps then it would be a sign to steer clear and not buy the stock.
If you do decide to buy, be aware that buying any IPO the first day is risky and especially so for popular and highly publicized stocks like Pinterest might be. Facebook stock opened around $38, traded briefly up into the $40′s, and then went down almost right away all the way into the teens. Any investor who bought Facebook stock the first day showed a loss for more than a year!
Likewise, Twitter stock also is down from its opening day price. Although it is early and the stock has only been public for a couple days, as I write this the price is around $41. On opening day the stock sold for $45 to $50.
What you need to learn from this is that waiting to buy is the smart thing to do when it comes to IPO’s. Wait for the euphoria to settle down and see whether investors are still as excited about the stock in a week or a month as they were on opening day. Most of the time you can get in cheaper somewhere down the road than you can on that first day.