Facebook has increased the size of its initial public offering by almost 25 percent, and could raise as much as $16 billion, leading some to believe the mistakes of the dot-com bubble are being repeated all over again. “Mad Money” host Jim Cramer, however, doesn’t think that’s the case.
“What's happening now is nothing like the insanity that gripped the market in 1999,” Cramer said, noting that there were 289 Internet-related IPOsthat year, which is much more than today. In 1999, Internet-related deals also accounted for roughly 60 percent of all IPOs with the average stock having spiked 90 percent on its first day of trading. Again, today is a much different story.
“Facebook is a fabulous company, one that's much better than any social media IPO we've seen so far,” Cramer said. “I think the stock will succeed, like LinkedIn, not flunk like Groupon or Pandora.”
LinkedIn is “basically Facebook for adults,” Cramer said. The Mountain View, Calif.-based company operates a social network that allows professionals to connect and network with one another. Management has been conservative, too, allowing the company to beat estimates. On May 3, it reported strong quarterly results.
“I think it's a good sign that the one social media play that's really worked is the one that's just like Facebook. Don't forget, though, that even with LinkedIn you got a much better chance to buy than on the first day of trading,” Cramer said. “The stock initially popped, but then pulled back in a major way before rebounding. Buying the pullback was much smarter than buying the pop.”
Like LinkedIn, Cramer thinks Facebook will pop on its first day of trading. So he doesn’t recommend investors buy it when it starts trading on Friday.
“If you don't get in on the deal recent history says patience, as painful as that might be, will be rewarded,” Cramer said. “Wait for the enthusiasm to subside and I am willing to be that the market will, indeed, give you a better price.”
Read on for Cramer: The Best Run U.S. Companies
—Reuters contributed to this report
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