Indian CIOs ready to buy Facebook shares. Are you?

BANGALORE, INDIA: It started as a tiny social media website in a Harvard dormitory. Eight years later with an approximate 900 million users worldwide, everything was hunky-dory for social media giant Facebook until it went public on May 18.

The IPO was expected to be a big success. But as we all know, once the dust settled, the offering fell on its face.

Call it bad timing or poor planning, in a lackluster launch Facebook stocks opened at $38, but soon it went on a downhill slide with the price dropping to $27 in over three weeks.

People, who lost no time in adding hundreds of friends,liking thousands of wall posts, and making Facebook CEO Mark Zuckerberg the youngest billionaire, seemed to be on a reality path when it came to investing in stocks. Facebook can derive some significant lessons from this: Popularity hardly matters where money really matters.

Though Facebook is considered more tangible than most of other social media companies, perhaps US investors began analysing the intricacies of the business model only after its hype faded. There could just be a big list of ifs and buts-- one can hope to triple the money in five years if the share price improves, the stock might pick up soon if the company proves its capability to add earnings. And if nothing works out, Facebook could well be a passing fad.

Considering nuances of a good business and well aware of reality that the social media network might quickly lose appeal in the face of competition, Indian investors are treading cautiously. That doesn't necessarily mean they aren't hopeful of Facebook bettering its prospects in a year, if not very soon.

"I'm confident that Facebook will look into the reasons for its present state and would take appropriate decisions. The future will not be as bad as now," says Girish Rao of Marico Limited.

On the day Facebook went public, technical glitches hit Nasdaq leaving the investors clueless about their shares and money. That has been to some extent resolved with Nasdaq agreeing to hand over $40 million in cash and credit to reimburse investment firms that lost money on Facebook's opening day because of computer glitches at the exchange.

"Currently, it is the sentiments and not fundamentals that are driving the Facebook. I would wait and watch for 4-6 months to buy shares. It will surely be a good buy going by its present prospects," he said.

There is always a chance that things can go wrong, especially when it comes to business. So, as a long term strategy, investors are not much worried about delaying purchasing of shares and feel there is nothing better than adopting the wait and watch policy.

"The market picture isn't very clear. Moreover, with fast approaching US elections anything can happen. So, I would prefer to wait for a year as things would be pretty much clear by then," Devpal Sisodia, CIO of Reliance Power.

Is investment in Facebook worth the money? There are several factors that would majorly influence the decision like its very business model as a social media network. The success of many businesses depends mostly on monetizing the mobile platform, the area in which Facebook has had its own difficulty.

Facebook's stocks are down, but it is not dead. However, it would be inappropriate to devalue social dominance of Facebook. At a time when some experts are writing it off as a failed business, there are some CIOs like Raveendran N of Sakthi Finance Ltd/ABT Industries Ltd, who feel it is wrong to underestimate its power.

"It's worth investing given the kind of base it has and considering its social dominance. Facebook has established itself as a brand that none can compete with so easily. I am optimistic that Facebook shares will pick up and its market will go up," he says.

There is nothing wrong in taking a calculated risk. Indeed, it's advisable that one is aware of the risks before taking a plunge and ensure the long-term investment plan is based on a good investment strategy. Ultimately, what's essential is what comes back.

Putting it in a very rational way is Vandana Avantsa, CIO of Motherson Sumi Systems: "When I invest I expect good returns, I normally don't go by the hype surrounding the company."