Here's how you get a piece of Facebook

Danny Moloshok / AP

Facebook's logo is seen at a movie theater in Los Angeles. The social network's stock is expected to start trading on the Nasdaq this Friday.

By Roland Jones

Excitement is mounting for Facebook?s expected debut on financial markets Friday. So if you?re an individual investor, can you get a piece of the action, and should you?

The first thing to remember about IPOs is that they are not normally geared toward individual investors. Underwriting banks typically allocate IPO shares to their best clients, which include hedge funds, wealthy individuals and large institutional investors. These investors will get the right to buy a certain number of shares at the offering price, which is expected to be announced Thursday afternoon. Facebook estimates the offering price will be in the range of $28 to $35 a share.

Some smaller retail investors may get a few shares allocated, especially if they have a good relationship with a broker for one of the dozens of underwriting firms handling the transaction.

If you have not already been in touch with your broker, however, it is too late to even try get in at the offering price. The deadline to express interest was Tuesday afternoon at brokerages we checked with, and the deal reportedly is oversubscribed.

Your only option is to buy shares after they begin trading on the Nasdaq stock market, when the price will be set by the law of supply and demand.

?This is not a strategy for the faint of heart,??said Hugh Johnson, chief investment officer of Hugh Johnson Advisors in Albany, N.Y.?Intense?interest in Facebook?s offering is likely to drive the price up sharply as soon as trading begins, meaning the first public trade could be well above the offering price.

In an example of the type of pressure investors could face, LinkedIn, another social media company, went public almost exactly a year ago at $45 a share and closed at $94 on a volatile first day of trading that saw its shares top $122 at one point.

That means investors lucky enough to get in at the offering price were able to book an immediate paper profit of more than 100 percent or?"flip" shares and cash in. Other investors paid as much as $122 a share for LinkedIn that day and were left with paper losses. (LinkedIn shares currently trade for about $113.)?

Facebook could easily see a similar first-day trajectory, but it is impossible to know. Online investors who place a general order for Facebook stock will get shares at whatever price happens to be prevailing at the moment.

?Is it a sound investment for a sensible portfolio? No," said Johnson. "Is it a worthwhile speculative investment? Sure, but you have to be fully prepared for something that could be a very emotional event. And I have the sense that [the IPO price] could be very overvalued.?

One good piece of news about Facebook?s IPO is there are plenty of shares up for grabs.

In a sign of intense investor interest, Facebook said early investors in the company will be selling more of their shares in the IPO, bringing the total number of shares available to as many as 484.4 million, up from a previous maximum of 337.4 million.

The news came a day after Facebook raised the expected price range for the stock to a range of $34 to $38 per share, up from its previous range of $28 to $35.

Still, despite the increased number of shares on offer, the hype and interest surrounding Facebook?s IPO are precisely why investors should be cautious about investing in the company, said Professor Anant Sundaram of the Tuck School of Business at Dartmouth.

?My concern is the market is pricing [Facebook] to perfection ? and the kind of fundamentals that are premised in that valuation, growth and revenues and cash flows, are simply astronomical,? he told CNBC Wednesday. ?Now it?s possible they could achieve that, but I think the probability is low.?

Sundaram also says the fact that founder Mark Zuckerberg will control more than 50 percent of the company?s voting rights after it goes public is ?very, very troubling.?

While a handful of new technology companies, such as Google, have thrived under the tight control of their founders, the stock ownership structure at Facebook limits the ability of shareholders to take action if things go wrong.?He?said evidence shows tightly controlled companies are more likely to wasteful acquisitions, overpay employees and spend unnecessarily on capital expenditures.

Other technology companies, such as Microsoft and Apple, have fared well without that sort of governance structure, Sundaram said.?

?Basically, as investors we are being asked to liquefy and validate a lot of insider wealth, and being told to sit and zip your lips in the peanut gallery,? he said.

While Facebook is expected to get a big opening-day ?pop,? Kathleen Shelton Smith, co-founder and chairman of IPO research company Renaissance Capital says it?s more important to track what Facebook?s stock price will be a week or a month after its initial trading day.

?For an IPO to work it has to trade higher over time after the initial trading day, and not all of them do,? said Smith. ?So the challenge for the underwriters is to price the IPO where it can move higher over time.?

CNBC's Kayla Tausche reports Facebook's IPO is expected to be priced in the $34 to $38 range after the market closes today.

?The question is, over time will the company deliver the kind of performance that justifies its price? Every investor studying this company wants to work that out.?

For individual investors, it is worth remembering that Facebook shares will be available on Nasdaq for the foreseeable future. Would-be investors can wait a day or two and buy shares when the price is less volatile.

For investors interested in IPOs, but unable to purchase them directly, Smith suggests investing in a mutual fund that track the IPO market, such as the Direxion Long/Short Global IPO Fund (ticker:?DXIIX) or the Renaissance Global IPO Plus Aftermarket Fund (ticker:?IPOSX).

Investing in these funds might even be a smarter play than buying Facebook shares directly. Sundaram said there are many reasons to expect Facebook shares to fall after their opening day.

He pointed to similar technology companies such as?Zynga, which have seen their share prices fall after the expiration of "lockups" that prevent company insiders and major investors from selling for at least 90 days after a stock is first publicly traded.

If Facebook shares manage to hold their value??that would be a remarkable achievement in my book,? he said.

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