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Four Things Not to 'Like' About the Facebook IPO

Facebook has a solid business right now, but keep these weaknesses in mind before getting too excited.

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More ink has been spilled on the Facebook IPO in the few days since its initial SEC filing than many companies will see in their entire lifetimes. Not that anyone is terribly surprised at the buzz around this offering. Tech firms in general have been red hot over the last few years, and Facebook is a product that many investors and journalists alike interact with on a daily basis. Add in a founding story intriguing enough to launch a blockbuster movie and you have the ingredients for wall-to-wall coverage.
 
Further, much of the commentary so far has been quite positive. And not without reason. Facebook's S-1 revealed that the firm is fantastically profitable at the moment and is churning out cash flow without needing to bring on a lot of staff or to make big investments in technology. Compare this with Groupon's (GRPN) filing that showed lower margins than expected and used non-GAAP measures (which the SEC forced the company to correct), and Facebook looks even better. 

But even with everything going for it, Facebook faces some real challenges that investors need to consider before jumping into the social networking giant. Here are four key issues that jumped out at me this week.

Bearemy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.