Back in 1980, when I was working for an investment firm, I was using an Apple II computer, made by a private company at the time called Apple Computer Inc. (AAPL), utilizing the VisiCalc spreadsheet program. I couldn't believe that calculations could be done so easily on a small machine and then printed out. Previously, the investment company I was working for was contracting out to a 'service bureau' which would process our calculations on a mainframe computer and would charge us based on the amount of time spent on the computer. The Apple II was a lifesaver, a time-saver, and a money-saver for the company. That spreadsheet program allowed me to develop tax and cash flow analysis programs.
I was so impressed that I wanted to invest in this little Apple company, but unfortunately, it wasn't publicly traded. Fortunately, I read in a Forbes Magazine article that a publicly traded venture capital company, which would now be referred to as a closed end fund or CEF, owned shares of Apple. The fund was the called the Nautilus Fund, based out of Boston, Massachusetts. I immediately decided to buy some Nautilus for myself and some relatives. Apple went public in December with an underwriting handled by Morgan Stanley (MS) and Hambrecht & Quist, and Apple shares were spun off to the Nautilus shareholders.
Apple went public at less than $15 per share, immediately started trading at $22 per share, and closed at $29 at the end of the day. It was the largest Initial Public Offering in history at the time since the Ford Motor IPO in the 1950's.
Sometimes, the only way to invest in a 'hot' company is through a private equity company, since the chances of getting shares on the IPO are almost impossible. The few publicly traded venture capital companies gives smaller investors an opportunity to participate in this potentially very lucrative investment arena.
This is now especially true of Facebook shares. Investors now have numerous options to invest in Facebook ahead of time, before the IPO. There are dozens of closed end funds and regular mutual funds that now own shares of Facebook, according to the free list at WallStreetNewsNetwork.com.
Since the average investor has no chance of getting Facebook IPO shares, funds that own some Facebook stock are the only alternative. I wrote an extensive article called 27 Ways to Buy Facebook Stock Before It Goes Public, which appeared a couple weeks ago and explains all the various ways of getting Facebook ahead of time.
Disclosure: Author owns AAPL.