James Dennin, Kapitall: A potential Twitter IPO continues to draw speculation, but what does that mean for investors?
In case you haven't heard – Twitter is going to great lengths to avoid some of the mistakes made by Facebook (FB). It's disastrous public offering, with excessive hype and an absurdly high valuation ($100 billion vs. an actual value around $5 billion), caused computer glitches and botched the IPO of the premier name in social networking. The problem for Facebook was that it rolled out too quickly, before it started to actually generate much revenue. Twitter is trying, and failing, to keep a low profile as the media seizes upon every new hire and every new acquisition, that the micro-blogging site makes.
[Read more from Kapitall: Whats Next For Bill Ackman?]
The first instance came last May, when the internet jumped on Twitter's job posting for a stock administration analyst. The company tried to plug the hole by taking the listing down, but by that point it was too late, and Twitter went ahead with the hire anyway. Just this week Twitter made another important hire in Nathan Hubbard, an executive from Ticketmaster and Live Nation (LYV), to run its nascent "commerce" division. The 38-year-old former musician has already described the early stages of a plan to pair Twitter users with vendors more directly.I say nascent, because Twitter is still working tirelessly to monetize its world of shout-outs and hash-tags. Much of the company's acquisitions have been related to video streaming or advertising – including the video app Vine and the smaller Trenderr, a marketing company that tracks social media engagement around television advertisers. And Twitter still isn't as big as Facebook, which has more users and, perhaps more importantly, far more information about those users to sell to advertisers. However, Twitter is managing its growth more carefully than Facebook did, moving in slower increments. Its valuation of $10 billion seems like a lot for a company with only $350 million in yearly revenue. However, that's only a tenth of the initial estimate mounted by its competitor. And it leads Facebook in one extremely important area – mobile ads. As early as last year, Twitter's take of mobile ad-sales was almost double Facebook's. When you consider the importance of mobile advertising, and its growth prospects, Twitter is looking even better. Bankers have already begun creating accounts in the hope of fashioning a Twitter-friendly reputation for themselves, in time for the IPO. Sources close to the matter say the early 2014 IPO dates put forward by speculators are likely too soon. But evidence that Twitter is making moves in this direction is starting to get pretty overwhelming. Amazon (AMZN) and Ebay (EBAY), you've been warned. Click on the interactive chart below to see analyst ratings over time. [Compare analyst ratings to annual returns for stocks mentioned]
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts