Market Beat: Analyzing the Twitter (not Tweeter) IPO
Ryan Summerlin October 10, 2013
On Sept. 12, Twitter tweeted that it was planning to take its company public in an initial public offering, known as an IPO. Twitter’s official tweet said, “We’ve confidentially submitted an S-1 to the SEC for a planned IPO. This Tweet does not constitute an offer of any securities for sale.”
The announcement sent the shares of Tweeter soaring above 1,000 percent. Tweeter has nothing to do with Twitter. Tweeter is an electronics retailer than filed for bankruptcy in 2007. Apparently, there were some traders who mistook Tweeter for Twitter and bought shares in hopes of a quick profit.
Twitter filed its S-1 form with the SEC confidentially so the details weren’t available to the public initially. The fact that they were able to file their S-1 confidentially did tell us that their revenues are less than $1 billion per year.
On Thursday, Oct. 3, Twitter released its financials — in 2012, its revenue almost tripled to $316.9 million. For the first half of 2013, it posted a loss of $69.3 million on revenues of $253.6 million.
Expect this to be the most anticipated IPO since Facebook went public in May 2012. The Facebook IPO was something of a fiasco, but the shares have performed very well since and have more than doubled in value since June of this year.
Internet stocks in general have done well this year. Priceline has traded more than $1,000 dollars per share, finally exceeding its high which was set way back in 1999, during the dot com bubble. The tech heavy NASDAQ index is up more than 26 percent year to date.
Most analysts are predicting Twitter will be valued between $15 billion and $20 billion once it begins trading. There is a legitimate concern over the number of fake Twitter accounts that are out there. There is an active gray market in selling fake Twitter followers. Still, most analysts believe Twitter will have rapid revenue growth mainly through advertising.
Twitter’s goal is to raise about $1 billion from the offering. It will be interesting to see how this IPO goes, and more importantly, how the stock performs once it begins trading publicly.
The exact date of the IPO hasn’t been announced yet, but we should get the date pretty soon. We also don’t know what their symbol will be yet — maybe something like “TWIT” — who knows.
Twitter stock will be worth following, but be sure you don’t buy Tweeter by mistake.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information on his money management service can be found at his blog at www.sellacalloption.com or by calling 775-657-8065. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.