Twitter, Too Much Froth

I am not a tech-bashing person. I really liked Facebook and still do as I have had that in my portfolio with Marketocracy. I even had a trade with Linked In for a while. Now, Twitter is very frothy. The stock rose to $44.90 at the close in New York from the initial public offering price of $26, delivering the biggest one-day pop for an IPO that raised more than $1 billion since Alibaba.com Ltd. debuted in 2007, according to data compiled by Bloomberg. Twitter sold 70 million shares, raising $1.82 billion.
What Twitter did correctly, which Facebook did not .... leave some upside for investors, do not max out your IPO valuations. But the froth in Twitter is mainly speculation as many of the original pre IPO shareholders still have moratoriums on their shares. I mean seriously, Twitter is more expensive than Facebook!!!!???
The San Francisco-based company, which is unprofitable and has one-fifth as many users as Facebook, is benefiting from investors’ thirst for companies that will grow quickly in expanding markets like mobile advertising.
At the current price, Twitter is valued at $24.9 billion, or 22 times estimated 2014 sales of $1.14 billion, according to analyst projections compiled by Bloomberg. That compares with 11.2 times that Facebook traded at today, and price-to-sales ratio of 11.7 for Linked In. As a side note, when put side by side ... Facebook is still way cheaper than Linked In as well. I mean, the reach and breadth and indispensability of Facebook ... how to fight?
Facebook declined 3.2 percent, and LinkedIn fell 4.2 percent today. At its market debut in 2012, Facebook’s stock was flat, propped up by bankers, while LinkedIn’s more than doubled on the day it went public in 2011.

Price ‘Hype’

The pricing puts the onus on Twitter to deliver on its promises of fast growth after earlier pitching shares as low as $17. Chief Executive Officer Dick Costolo has rallied investor interest in Twitter’s rapid sales curve -- with revenue more than doubling annually -- even with no clear path to making a profit.
The company received orders for about 30 times as many shares as it offered at the $26 IPO price, a person with knowledge of the matter said. About 8 million of the shares, or 11 percent of the total in the IPO, were allocated to retail investors, the person said, asking not to be identified because the information is private. A typical retail allocation is 10 percent to 15 percent.
I think Twitter can be a buy but below $30.
OWNERS OF TWITTER
Evan Williams (Founder)  12%
Rizvi Traverse (fund)  5%
Jack Dorsey (Chairman)  4.7%
Dick Costolo (CEO)  1.6%
Other funds with less than 5% stakes: Spark Capital, Union Square Ventures,  DST Capital and  Benchmark Capital

Comments

bruno said…
Twitter is a losing concern and will be a losing one for the next several years.Investors are paying this high price for the so called potentials this company has to offer.My 2 cts worth.I will avoid this stock like the plaque.Let the brave own them.
Unknown said…
Isn't That What IPO's are All About. Stop groaning and be a Party Pooper. Join tne Party but Make Sure you get out and for goodness sake don't hang around for the dreadful morning after!
bruno said…
Just some thoughts for the road and the weekend.I was watching Friday's Asian and European trading.Although their was some bias on the downside,nothing much to scream about.And US stock indexes was trading slightly on the upside.Also nothing to shout about.The S&P was hovering from plus 1-5 pts and I was just waiting to get out from my short positions,since there was no strong follow through on the downside in Asian and European trading.

As soon as the NFP figures came out and the futures turn negative,I bought at market and got the heck out,so very happy to get that extra 5 pts.

By 9 am,I was already out of the house,having some breakfast at McDonalds.As usual the place was 3/4's empty.Then I went window shopping at Joseph A Banks.It is buy 1 anything and get 3 free.

Came back early afternoon and the S&P was up 12 pts and is now up 17 pts.

Call it street smarts or beginners luck.After watching the early action it wouldn't take a genius or a rocket scientist to figure it out not to get too greedy,take your profits which are rightfully your money and run,run and run.

Yes,maybe the markets might forget to stop falling and we might have to miss a home run.But even the best baseball players in this planet do not know when or which inning they are going to get a home run.And like I always said,who cares after the fact.Have a wonderful weekend boys and gals.

SmokingGun said…
Cant short the shares as shorties can't borrow them yet. It's a long only market for now. Once shares become available for borrowing, it will tank below 30.
bruno said…
It is high time traders start taking a serious look at the greenback.I meant a very very serious look at the USD,which the so call experts like to call the doom currency.

From a seven month's low it came back kicking,socking the Euro hard on the chin.And the single currency had it's single worst week in a year.The high flying currency called the Aussie got whacked hard too.

Next year will be one of the best years of the greenback in a very very long time.Wait for a pullback early next week to go long against the Euro and Aussie,which will be the hardest hit among the majors.

I will time it around 1780-1790 cash basis to go short the S&P Index and long the greenback.The 1800 big fig will be a brick wall for the S&P.For those who like to hold a stock or commodity forever like a spouse,should really take a serious look at this USD trade.

We,as traders should learn to have a share in enjoying the spoils of the fx markets,courtesy of the central bankers,particulary Big Benny who will be replaced with a yet bigger dove Janet Yellen.

bruno said…
It is high time traders start taking a serious look at the greenback.I meant a very very serious look at the USD,which the so call experts like to call the doom currency.

From a seven month's low it came back kicking,socking the Euro hard on the chin.And the single currency had it's single worst week in a year.The high flying currency called the Aussie got whacked hard too.

Next year will be one of the best years of the greenback in a very very long time.Wait for a pullback early next week to go long against the Euro and Aussie,which will be the hardest hit among the majors.

I will time it around 1780-1790 cash basis to go short the S&P Index and long the greenback.The 1800 big fig will be a brick wall for the S&P.For those who like to hold a stock or commodity forever like a spouse,should really take a serious look at this USD trade.

We,as traders should learn to have a share in enjoying the spoils of the fx markets,courtesy of the central bankers,particulary Big Benny who will be replaced with a yet bigger dove Janet Yellen.

bruno said…
The NFP came out better than expected at 200k,80k better than street expectations.Last month's was revised upwards too.So what can the fed's do?To taper or do more QE.

Bernanke knows that he has got the feds and financial markets into such a mess,that months and months ago he was figuring out how to get the heck out.The best single thing that came into his mind was to feed the public that he wasn't interested in another term.And Obama jumped onto the bandwagon as the Republicans was after Benny's hide for being such a big dove.

Now that the employment figures have painted the feds into a corner,replacement Janet Yellen has her work cut out for her.Act like a hawk,just taper.Bit by bit.Little bit at a little time.But i bit or 10 bits,a taper is still a taper.And when the markets finally starts coming down like an avalance,blame it on Yellen,not Big Benny.In politics and now fed lingo,it is called passing the buck.