Experts caution on Facebook IPO frenzy

As the shares of social networking giant Facebook begin trading on the NASDAQ exchange today, experts believe that the stock is overpriced at $38 apiece and one must wait for now to invest in the firm.

NYU Stern School of Business Finance ex-Professor Kenneth Froewiss said that adding Facebook to a portfolio early on is risky for experienced pros and investment amateurs alike.

"Even for those individuals with above-average net worth, purchasing shares at an IPO, especially a 'hot' one that has been widely hyped, is rarely a good idea," Froewiss said.

He said it is like playing a lottery. "Might someone on occasion reap a tremendous windfall by doing so? Yes, but then again, on occasion someone wins the lottery. That does not make the lottery a great investment in general," he added.

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Facebook made history by launching one of the largest initial public offerings for a technology firm, aiming to raise $16 billion that pegs the value of the world's most popular social networking site at $104 billion.

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The shares would begin trading on the NASDAQ exchange today under the symbol 'FB'. The public offer is expected to close on May 22.

At $16 billion, the size of Facebook's IPO is the third-largest for a US company, with the largest being the Visa IPO, which raised $17.9 billion in 2008, according to Renaissance Capital.

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The current excitement about the company's stock market debut does not guarantee long-term interest or success, experts said.

"In my experience this stock and its IPO has seen more enthusiasm than any other I have seen over my 40 years of investment experience," said Lewis Altfest, CEO of NYC-based Altfest Personal Wealth Management.