One of the most highly anticipated IPOs of the year promises to be the Facebook IPO. From the moment that Mark Zuckerberg let it be known that Facebook would become a publicly held company, investors have been debating the true value of Facebook, and anxious consumers are wondering if they can get a bit of the action.
With so much hype surrounding the Facebook IPO (hype that only seems to be heightened by snags in the process, and the resulting delays), a number of consumers are vulnerable to Facebook IPO scams. You need to be alert for this, since it presents an opportunity that seems to be a legit way to get in on the ground floor of the Facebook IPO.
How IPO Scams Work
For the most part, shares of pre-IPO companies are offered to insiders associated with the company already (employees, venture capitalists, founders, officers, etc.). That doesn’t stop scammers, though. These scams claim that you can buy pre-IPO shares of Facebook — and the scammer may even claim to be an investor, or an insider. You are offered the chance to buy in, and promised untold riches when Facebook goes public and the price skyrockets. Thousands of dollars in profit — instantly!
The problem, of course, is that someone with actual inside knowledge of Facebook (or any company for that matter), isn’t likely to offer these soon-to-be-valuable shares with just any person on the Internet. People with real access to pre-IPO Facebook shares are likely to cut their actual family members and friends in before sending some random person an email. Indeed, such an insider is likely to hang on to the shares until after the IPO.
Anytime someone — especially someone you don’t actually know — sends you an email offering you the chance to take advantage of an opportunity, you need to be suspicious. Most of the time, these scammers just plan to take your money and run. They might make a show of providing you with “evidence” of returns on paper, but eventually the fraudster will take off, leaving you empty-handed.
Stay Vigilant about Scams
You always need to be on the lookout for scams online. Facebook isn’t the first company name to be used in order to scam consumers out of hard-earned cash. Plenty of other anticipated IPOs are preceded by scams claiming an insider track to shares. Some scammers might even settle on just allowing you access to lesser-known IPOs, or even ask for your money to invest in a variety of promising, low-profile IPOs that will bear fruit in a few months.
The allure of instant riches can be a powerful factor in getting you to turn over your money. And, of course, these scams are meant to sound plausible, encouraging you to sign up by using jargon, and insisting that it’s possible to get pre-IPO shares at a fraction of their value. Even though you might hesitate, it seems like a solid opportunity, and you probably want it to be true.
No matter the “investment opportunity”, it’s important to be on your guard. Remember: If it sounds too good to be true, it probably is.