Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Twitter's IPO: #Countmeout

Companies / Internet Oct 11, 2013 - 12:40 PM GMT

By: Money_Morning

Companies

Keith Fitz-Gerald writes: It used to be that companies went public after achieving a modicum of success. There were business models, calculations, and plans, all based on real results and proven success.

Now it's all about potential.

There are still plans and projections, but proven success has been hard to come by.


Remember, Pets.com had a plan. It was going to change the way we took care of our animal buddies. Only, it didn't. And now it's gone.

Kozmo.com was supposed to be a messenger service that embodied online delivery. It's gone, too.

Epidemic.com? Gone. WebVan? Gone. Lastminut.com? Gone. Dr. Koop? Gone.

Despite the media hoopla at the time, investors were ultimately left high and dry. And now it could happen again...

Twitter, the micro-blogging social media darling, has finally filed for its much ballyhooed IPO. And the valuations being assigned to it range from $12 billion to as much as $25 billion.

That's asinine for a company that hasn't shown any profit potential.

Twitter Inc. may make a fine trading instrument, as long as the party continues. But as an investment?

You can #countmeout...

You Need Widespread Adoption to Succeed

Celebrities like Alec Baldwin, Ashton Kutcher, Sinéad O'Connor, and Jennifer Love Hewitt, who helped put Twitter on the map, are leaving because of their increasing unwillingness to deal with the venomous responses and insults left on their account pages.

I can't say I blame them. The level of vitriol piled on by those who hide behind the veil of Internet anonymity is staggering.

That's going to cut down on the need for "compelling" content - assuming you find that kind of thing compelling. I don't.

Twitter has throttled its API. What this means, according to Wired.com's Marcus Wohlson, is that the company is willing to "alienate some of its most impassioned users to consolidate control" by substantially restricting third parties from developing Twitter applications.

I can't say I disagree. The key to any company is widespread adoption from both users and vendors alike. Look at how rapidly Android has grown. It wasn't the platform that changed but the apps that made this possible. Apple Inc. (Nasdaq: AAPL) and Microsoft Corporation (Nasdaq: MSFT) are struggling, and could be headed the way of BlackBerry Ltd. (Nasdaq: BBRY)... which failed because the number of quality apps for it stunk.

And, finally...

Twitter Is Not Facebook

That's heresy, according to the technorati who are quick to compare the two companies now in the same breathless terms they used back in the dot.bomb heyday. Never mind that's what they said about AOL Inc. (NYSE: AOL), too.

Unfortunately, the market doesn't seem willing to reinforce the lesson. There are huge amounts of capital chasing anything that's got even the remotest hint of promise at a time when investors are desperate for returns.

Despite a badly botched IPO, Facebook Inc. (Nasdaq: FB) is now heralded as a success, and investors who were swearing off stocks for having bought it are now confusing Bernanke's stimulus-altered reality with genius. So they're comparing the two companies.

The problem is that Twitter is not even remotely Facebook. It's not even remotely the size Facebook was at this stage of its development. More to the point, it's not growing nearly as fast.

Ritchie King makes this abundantly clear in this chart from Quartz below.

And that's what really breaks it for me: the numbers.

According to Wikipedia, September 2011 saw Twitter with 100 million active users. By December 18, 2012 - a year later - there were 200 million monthly active users. By the time the company filed its S-1, that rapid growth had slowed down to only 218 million active users or a 9% year-over-year growth rate... down from 100% the year before.

Ad rates per user fell 46% on a basis in June, according to the company. What this means, according to Teirnan Ray of Barron's, is that, while the "number of ad slots the company had available to sell expanded greatly," that "didn't lead to a proportionate increase in ad buying."

Since inception, the company has racked up nearly $500 million of accumulated deficit. Losses have widened 41% to $69.3 million, which puts Twitter on pace to lose $138.6 million by year end.

Facebook trades roughly at 20 times sales, while LinkedIn Corp. (NYSE: LNKD) is at 21. An IPO at $12.8 billion would represent approximately 28.6 times earnings, according to Bloomberg. Goodwill and unproven potential evidently counts for a lot these days.

The Bottom Line

If you're thinking about investing in Twitter's IPO, you have to ask yourself: Do you really want to spend your hard-earned money on an IPO where you are, quite literally, the last in line on the profit train?

I don't.

The IPO process is a rigged game where the founders, early investors, and investment bankers make out like bandits. As a retail buyer, you really are the last in line.

Twitter has the same problem that any social media company has... it's got to convert eyeballs into paying customers. That may never happen because...

#Thenextbestthingisonlyaclickaway...

Source :http://moneymorning.com/2013/10/11/twitters-ipo-countmeout/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in