Asian Business Issues - Rants & Raves, Illusions & Collusions etc.
Friday, November 08, 2013
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.
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