Hot Features
Premium
Trade smarter, not harder: Unleash your inner pro with our toolkit and live discussions.
Let’s be honest, you heard about it on Twitter didn’t you?
Twitter has announced an IPO – will it be a success or will investors choose not buy a company based on sharing ideas in 140 characters?
The above query came in at an appropriate 136 characters, but have no doubt that the press (myself included) will churn out endless digital and paper-based speculation trying to answer it after the company itself tweeted “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.”
No hashtag, Twitter? #novices.
Maybe if the company was not one based on using a limited number of characters they’d have felt more inclined to say what they actually intended to do. As it stands we will just have to wait till they announce their business plan – probably 140 characters at a time in the longest stream of tweets yet to be seen. In that absence, let us ponder.
According to the BBC private investors have previously valued the social media platform at $10bn and are set to make a profit of $583m in 2013. But the question for investors is whether Twitter can expand, grow and generate profits that reflect its increasingly dominant place in its users’ lives.
In February this year Twitter said it had 200m active users. Whilst this number is now woefully out of date it would mean that for every active user Twitter makes $2.92 per year. If we factor in that the number of users is likely to have grown by 20-50m since February this amount is diluted even further.
A company making nearly $600m from a service that is free for users is no small achievement, but is it really enough to get investors excited? “More bollocks, in my humble opinion” was the view of one experienced trader I spoke to earlier.
Twitter’s immense cultural impact and role in the Arab spring and the 2012 US Presidential election is undeniable, but when it comes to putting your money on the line and buying a cold, unemotional balance sheet and business plan is what actually counts.
And can you blame them? Myspace came and went, Facebook lost face from its own IPO last year and is losing active users. There is no sign yet that people are getting bored of Twitter, but at one point it seemed like people would never got bored of Jeremy Beadle but that day eventually came.
If Twitter can unveil a master plan that shows expansion, increased diversity of revenue streams and a diagram of how it is not placing all its eggs in one basket then wary investors may well back the company. Until then we are left adrift in a mass of uninformed opinion, incorrect facts and reactionary views – just what Twitter does best.
