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TheStreet Open House

Twitter Is Ready for Its IPO

Stocks in this article: FB

Ever see a parent of three listening to a single person complain about how stressful their weekend was? Usually, the single person says something like: "Oh my God, I had all this deadline stuff from work to deal with and I had to clean my apartment as well..." Usually, the parent turns and rolls his/her eyes.

My point is this: You mature as a company and as a management team when you IPO. Look at Facebook now compared to 18 months ago. Was it throwing as much at the wall then as it is now in terms of launching new services and trying to make money? No. Why? Because the investors weren't pushing it to and the new public ones are.

Was Facebook's board as good then without two women as it is now? No. Why did it change? Because investors were incensed at Mark Zuckerberg for this oversight and he bowed to this outside pressure. In my view, Facebook is a much stronger company today than it was then and I credit the "crazy" and "short-sighted" Wall Street investors for helping it. I think this outside pressure from Wall Street will be equally beneficial to Twitter.

Twitter's adoption by TV and media is remarkable. Twitter will probably never get to the size of Facebook in terms of users. However, turn on the TV and notice how every other ad now promotes a key hashtag. Notice how every show includes a hashtag next to the network logo.

For a company that was always looked down upon by Facebook investors and employees, it's amazing what Twitter has accomplished in terms of mindshare. I credit Dick Costolo (the CEO) and Adam Bain (the head of Sales) for this focus. The fact that they have become so prevalent gives them a huge opportunity to jump off and monetize across all traditional and now new Web/mobile media platforms. That story will be an integral part of how they sell Twitter on an IPO roadshow.

So, assuming they go out this year, what will Twitter be worth? It's really hard to say. Based on the idea that it'll do $1 billion next year (2014), I think it'll get a minimum of 10 times those sales, which would be a $10 billion valuation.

However, this being a big IPO, I expect the bankers and media to hype it up and it wouldn't surprise me to see investors value Twitter and 15, 20 or even 30 times sales, which would mean a valuation up to $30 billion.



I don't think a $30 billion valuation would be sustainable for Twitter, just like a $75 billion to $100 billion valuation for Facebook wasn't sustainable in the end. So, whether it's a good investment or not will depend on how frothy the markets are at the time Twitter goes out.

However, in the long term I continue to think Twitter is going to be a fabulous and extremely important player in media for years to come. Its IPO will be a new chapter in that story.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Eric Jackson is founder and Managing Member of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. In January 2007, Jackson started the world's first Internet-based campaign to increase shareholder value at Yahoo!, leading to a change in CEOs in 2007. He also spoke out in favor of Yahoo!'s accepting Microsoft's buyout offer in 2008. Global Proxy Watch named Jackson as one of its 10 "Stars" who positively influenced international corporate governance and shareowner value in 2007.

Prior to founding Ironfire Capital, Jackson was President and CEO of Jackson Leadership Systems, Inc., a leadership, strategy, and governance consulting firm. He completed his Ph.D. in the Management Department at the Columbia University Graduate School of Business in New York, with a specialization in Strategic Management and Corporate Governance, and holds a B.A. from McGill University.

He was previously Vice President of Strategy and Business Development at VoiceGenie Technologies, a software firm now owned by Alcatel-Lucent. In 2004, Jackson founded the Young Patrons' Circle at the Royal Ontario Museum in Toronto, which is now the second-largest social and philanthropic group of its kind in North America, raising $500,000 annually for the museum. You can follow Jackson on Twitter at www.twitter.com/ericjackson or @ericjackson.

You can contact Eric by emailing him at eric.jackson@thestreet.com.

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