Facebook IPO: Avoid Buying in the Aftermarket, Cramer Says

Any investor who can get shares of the Facebook IPO should purchase as many shares as possible, Jim Cramer said on CNBC’s “Mad Money.” Once Facebook becomes public on Friday, though, he would be “extremely wary” of buying the stock in the aftermarket.

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On Monday, Facebook increased the price range on its IPOan average of 14 percent to raise more than $12 billion, giving the world's No. 1 social network a valuation potentially exceeding $100 billion. The price range is now from $34 to $38 a share.

“The underwriters wouldn’t have raised the price range on the deal unless it was massively oversubscribed, meaning there’s tons of interest from investors,” Cramer said. “That means Facebook will almost certainly come public to a huge spike when it starts trading on Friday.”

So what should investors do with Facebook after the IPO, especially if they weren’t able to get in on the actual deal? Cramer said there is but one lesson from past social media IPOs: under no circumstances should you buy Facebook on Friday.

“If you can’t get in on the IPO, there may come a time where it makes sense to buy the stock in the aftermarket, but you’re going to have to be patient because that time will not be during the first day of trading,” Cramer said. “In short, stay the heck away from Facebook on Friday. The moment the market opens, Facebook will immediately enter a no buying zone.”

The bottom line? Investors who haven't been able to get in on the Facebook IPO should avoid buying shares Friday, Cramer warned. The stock is bound to pop in the aftermarket and there will likely be a better entry point sometime down the road.

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