Twitter IPO: A look at the ‘other’ social media giant’s initial public offering

Posted on 07. Nov, 2013 by in Business Wealth

Twitter IPO

In case you’ve forgotten, the Facebook IPO in 2012 was a big mess. The company’s $100 billion valuation and $38 per share were disastrously off the mark, and the overhyped, overvalued launch was further muddled by computer glitches that resulted in $10 million fines against NASDAQ. The Facebook stock price has since recovered with flourish, but not before dispensing a lot of headaches among private investors and the financial world at large. So that brings us to the highly anticipated Twitter IPO of 2013.

Twitter is the best known Silicon Valley company to go public since Facebook, though the early valuation estimates of 13.6 billion were modest in comparison to Facebook’s $100 billion. Helping Twitter’s IPO prospects are positive buzz and the overall state of the marketplace. 2013 has been the best year for IPOs in the U.S since 2007, and equity markets are continuing to climb as fears subside regarding the U.S. debt ceiling crisis. Furthermore, the mutual fund market, along with speciality segments like exchange-traded funds (ETFs), are heating up alongside optimistic stock index futures.

As for the buzz — based on red-hot demand by institutional investors, Twitter raised the top end of its IPO price by 25% to $23 to $25 per share on Monday November 4. Despite the late increase, which flirted with repeating the Facebook debacle, investors remained optimistic enough that Twitter was able to close shop on its first 70 million shares a day earlier than the Day 1 opening bell at the New York Stock Exchange.

But in the strange world of the stock market, optimism doesn’t always reflect figures and data. For example, in 2012, Twitter reported a net loss of $79.4 million on revenue of just $316.9 million in 2012. Analysts argue that the strong demand and rosy outlook on Twitter is justified based on other key factors. For one thing, any company with a social marketing strategy is probably going to leverage – and invest in – Twitter in some fashion or another. Furthermore,recent data shows Twitter activity, such as ratings and recommendation, driving increased viewership for broadcast TV. Once big advertising dollars start boosting the Twitter revenue stream, the optimism around Twitter’s stock value will start looking relatively conservative.

Let the great social network IPO race begin!

Image by Rosaura Ochoa

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One Response to “Twitter IPO: A look at the ‘other’ social media giant’s initial public offering”

  1. I’ve learned to stay out of the IPO game, for many of the reasons you’ve listed here. When you hear of something that is going to have a great IPO, conservative skepticism can be really important. The difference between the Facebook IPO and the Twitter IPO was that there wasn’t the same sense of optimism. The more the buzz, the more likely it seems that it may end up being a bust (as Facebook’s IPO was).

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