Gaming The Facebook IPO Game

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I like numbers and I like stats.  I suppose that’s what attracts me to SEO and that whole “algorithm thing” so much.  Our regular blog readers will remember my rant on May 18th on the Facebook IPO over-valuation where I compare Facebook’s stock prices vs revenue with Ford, valuing Ford at well over $2 trillion dollar if they got the same kind of multiples as Facebook does.  Unfortunately Ford has to exist in the real world where they’re expected to base their company worth on revenue.  What a novel concept.  But that rants done so on to a fun game …

As I’m sure you can all imagine I’ve been watching Facebook’s share prices regularly (dare I say … hourly).  I definitely feel sorry for investors but there is part of me that feels a bit better about the state of the economy knowing that Facebook’s stock is dropping to perhaps what it should be.  It’s still got a ways to go there though.  That said, watching the stock has revealed some interesting insight that I might even jump on if I had a risk-tolerance high enough to view my capital as Monopoly money.  Because I don’t really understand the stock market and just like playing with numbers however I’m not about to do that, but thought I’d share an interesting bit of data.

Facebook stock is following (generally) a trend, or at least has been for the past week.  Let’s say you like to day trade and you have $10,000 to play with.  If you buy each day at 2PM and sell each day at 3PM it would result in (note: I’m assuming a $0 transaction fee as those vary):

May 31st (start of day – $10,000)
At 2PM you’d buy 370 shares at $27.02 costing $9,997.40
At 3PM you’d sell for $28.20 for $10,434.00

June 1 (start of day – $10,436.70)
At 2PM you’d buy 376 shares at $27.75 costing $10,434.00
At 3PM you’d sell for $27.84 for $10,467.84

June 4 (start of day – $10,863.75)
At 2PM you’d buy 407 shares at $26.67 costing $10,854.69
At 3PM you’d sell for $27.22 for $11,078.54

June 5 (start of day – $11,087.60)
At 2PM you’d buy 419 shares at $26.41 costing $11,065.79
At 3PM you’d sell for $26.17 for $10,965.23

June 6 (start of day – $10,987.04)
At 2PM you’d buy 420 shares at $26.11 costing $10,966.20
At 3PM you’d sell for $26.79 for $11,251.80


At the end of the week your investment of $10,000 would have you sitting at $11,272.64.  Not bad – over 11% return in a week.

I noticed this while having a chat with a friend of mine (my co-host Jim Hedger) when Facebook had dropped further at around 11am one day and I said it’s a good time to buy as it’ll go up by the end of the day.  I decided to actually look at the trends as my thought was based just on an instinct at what I’d seen without paying attention.  Turns out I’d have been wrong that day and I was muddling my data from casual glances but if you actually look at the flow of value, there is one.  Some days you’ll come out behind but overall – you’ll come out over 11% richer.  had you bought at the lowest and sold at the highest points in a day of course you’d have made more but saying that is like saying drinking water will keep you hydrated.

I have to note this is just a fun analysis and not meant to be taken as any kind of advice.  I’m not buying shares nor do I plan to.  I expect the stock price to fall overall in the coming months and either way, I’m not a stock investor.  I say this so you won’t take this as any type of advice or think, “hey, I’m going to do that”.  Doing so would be akin to taking the advice of an SEO on how to win the Tour de France, I’m sure I could come up with statistical tips for you there to but a knowledgeable trainer is always better so if you’re thinking of investing in Facebook, get the advice of a qualified professional.  If you ask me – as a long term investment it’ll only be good for a loss in your books.

Follow Up:

To see if things progress along the same path, I’ve decided to track that $10,000 through the week after this post.  Each day I will be updating this post with the 2PM buy and 3:00 sell metrics.

June 7 (start of day – $11,272.64)
You’d buy 421 shares at $26.72 costing $11,249.12
At 3PM you’d sell for $27.07 for $11,396.47

June 8 (start of day – $11,419.99)
You’d buy 422 shares at $27.05 costing $11,415.10
At 3PM you’d sell for $27.02 for $11,402.44
* interesting note – last Friday it picked up around 3:15 too but I don’t want to change my numbers for Friday’s so we’ll stick with the 2PM to 3PM strategy as the numbers below continue.

June 11 (start of day – $11,407.33)
You’d buy 411 shares at $27.70 costing $11,384.70
At 3PM you’d sell for $27.30 for $11,220.30

Interesting to note – it appears that the first day of the week Facebook spikes first thing in the morning and then drops through the day.  If I continue monitoring this one after this week is up I may well adjust the numbers to just a buy at 3PM with a sale at 9:30 the following day.  Not quite as slick at the 2PM to 3Pm standard but we’ll see how that works through this week.  🙂

June 12 (start of day – $11,242.93)
You’d buy 415 shares at $27.05 costing $11,225.75
At 3PM you’d sell for $27.21 for $11,292.15

June 13 (start of day – $11,309.33)
You’d buy 411 shares at $27.45 costing $11,281.95
At 3PM you’d sell for $27.16 for $11,162.76

So – if you followed my ill-conceived advice you’d have made $1,272.64 in week one.  In week two you’d have lost $109.88.

For the next 5 business days we’re going to go with the same 2 to 3 buy/sell pattern but I’m going to take the leap and say, “It happened twice so it’s a pattern” and on Monday I’ll be tracking the buy at 3PM instead of two and hold on until Tuesday at 9:30.  I’ll then track the buy again on Tuesday at 2 for a sale at 3.

It’s interesting to note that after 2 weeks we’d have a 11.16% gain in revenue.  Had we simple purchased once at 2PM on May 31st (the first day in this example) and sold at 3PM on June 13th you’d have gained 0.05%.

So stay tuned for more bad advice. 🙂

Week Three:

Because I started monitoring this on the 31st of May (a Thursday) this is the first day of week three.  This week I’m sticking to the 2PM buy and 3PM sell rate I’ve been using thus far with one minor adjustment, on the first day of the week I’ll be buying at 3PM and won’t sell until 9:30AM the next day.  So on the second day of the week there will actually be two sales.

June 14 (start of day – $11,190.33)
You’d buy 403 shares at $27.73 costing $11,175.19
At 3PM you’d sell for $27.71 for $11,167.13

June 15 (start of day – $11,182.27)
You’d buy 386 shares at $28.90 costing $11,155.40
At 3PM you’d sell for $29.21 for $11,275.06

June 18 (start of day – $11,301.93)
You’d buy 357 shares at $31.65 costing $11,299.05
On the 19th at 9:30am you’d sell for $31.53 for $11,256.21.

June 19 (start of buying – $11,259.09)
You’d buy 353 shares at $31.89 costing $11,257.17
At 3PM you’d sell for $31.76 for $11,211.28

I’m going to stop now as here’s what’s clear … you shouldn’t follow my advice on investing.  My insistence on watching trends and keeping a toe-hold in reality makes me ill equipped to be an investor.

Had you invested $11,272.64 on June 7th at 2PM you’d have purchased 421 shares at $26.72.  If you followed my advice that would have turned into $11,213.20 losing you $59.44.  If you just sold at 3PM today you’d have turned that $11,272.64 into $13,370.96.  So in essence, if you’d followed my advice you’d have lost $2,157.76.

And that’s why it’s a better idea to leave things to the experts. 🙂

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