As Facebook IPO’s, Would You Rather Own FB or Gold?

Facebook Inc. (FB) rose 13% for its debut at $42.99, after a half-hour delay that mesmerized traders everywhere and slowed down the loading times of major financial portal Web sites. Shares had been priced at $38 on Thursday May 17, and were supposed to debut at 11 a.m. Eastern Friday, but were delayed for a short time on the Nasdaq exchange. All of this buzz is certainly exciting, and it’s quite easy to get wrapped up in the hype. Remembering the Google IPO,  you ask yourself: is it time to scoop up a few FB shares, with the aim of making a quick buck?

But before jumping in–if, indeed, you’re even tempted–it is prudent to remember some of the events that occurred since that other hyped Internet stock, GOOG, IPO’d at $85 per share. For one, we had that whole Great Recession thing, and the stock market went on a wild roller coaster ride (as has GOOG, which has been flat since its peak in 2007). For another, the price of an ounce of gold, in US Dollar terms, went from the low $400′s, to its present level near $1600, in a relatively steady upward climb.

Of course, performance in the past decade doesn’t imply much, if anything, about the next decade. Still, for the hard assets-minded investor, it can be helpful to contextualize new investment opportunities in terms of the world’s oldest universally-recognized store of value (as Warren Buffet did recently). We’ve taken the time to calculate a few numbers relevant to the Facebook IPO for the benefit of the hard assets-minded investor. We’ll use the debut FB share price of $38, and the recent Gold spot price of $1590, for our calculations.

Trading History and Time Period of as a Store of Value: FB vs. Gold

• Gold: About 2,500 years.
• Facebook shares: 8 years (privately),  1 day (public exchange).

FB Shares Expressed as Gold Value

• 1 FB share: 0.0238993710691824 oz. of Gold
• 1 FB (the entire thing): 65,484,276 oz. of Gold

P/E Ratio: FB vs. Gold

• FB: 88x
• Gold: n/a

Dividend Yield: FB vs. Gold

• FB: n/a
• Gold: n/a

Daily Trading Volume: FB vs. Gold

• FB: A quarter billion shares less than an hour into the day, and counting!
• Gold: The Gold SPDR (GLD), the most popular ETF offering exposure to physical gold, has an average daily trading volume of about 10 million shares. Of course, there are countless other ways to trade gold, so the real daily trading volume including all types of gold (physical and paper) is much higher.

Facebook vs. Hard Assets

To put the Facebook IPO in a bit of commodity-related perspective, here’s how the valuation of the company (at approximately $100 billion) translates into hard assets:

• 3.6 billion ounces of silver
• 14 million tons of copper
• 16.7 billion bushels of corn
• 38.2 billion MMBTU of natural gas
• 1 billion barrels of crude oil
• 83 billion pounds of live cattle
• 113 billion pounds of lean hogs
• 56 billion pounds of coffee
• 14 billion bushels of wheat
• 7 billion bushels of soybeans
• 44 million tons of cocoa

Hmm… that’s a lot of chocolate!

Disclosure: Long physical silver, physical gold, and various structured commodity investments.