Did you invest in Twitter (TWTR) on Thursday 11/7/2013?
Another day, another social media giant has an IPO (initial public offering) on a major U.S. stock exchange. I guess Twitter wanted to avoid the pitfalls that plagued the Facebook IPO and move on over to the NYSE instead of NASDAQ. It was probably a good move on their part because most reports indicate it was a smashing debut.
Twitter needed to generate a much needed cash injection because of some losses over the last few quarters while spending piles of investors money improving the overall quality and experience of the site. The “Twitter is over capacity” error pages have been on the decline as of late, but they also needed to increase its ability to make revenue from the site while not driving away users with full page ads such as those another social media site is fond of doing.
I thought Twitter was just a place for celebrities to vent; guess that is valuable
According to an article by the Dealbook blog, the company raised approximately $1.6 billion dollars to fund company operations after settling on an IPO price of $26 per share. This gives the company about an $18.1 billion valuation--this includes stock that will be issued to some very lucky employees--which makes it more valuable than several well known brick and mortar companies/manufacturers such as Dick’s Sporting Goods (DKS), Alcoa (AA) and the maker of Samuel Adams beer Boston Beer Company (SAM). Is twitter worth more than several large manufacturers/brick and mortar stores that have proven themselves? And by “proven themselves” I mean Boston Beer Company is in almost every grocery store in America as well as others around the world. Well, according to the market the answer is hell yeah it is. On its first trading day the market decided that Twitter was not only worth its IPO price, but added 73% more to the price before the trading day was over. Yep, it closed at the remarkable price of $44.90 giving it a total market cap of over $24 billion dollars. Imagine Dr Evil doing his finger to mouth thing as you say it.
We all know that first day IPO trading has more to do with emotion and getting caught up in the moment than a real evaluation of what the company is worth, but damn! The market thinks this company is worth over $24 billion for now...go figure.
Investors say that Twitter is a growth company and could have quite the upside in the future. I guess this could be true, but I have my doubts. I know you can pay to advertise your Twitter account to other users. They also have ways to get the banner leaderboard, Skyscraper and rectangular ads on the site asap...but is this going to make the company worth tens of billions of dollars? Only time will tell if this will shake itself out in the market.
Can Twitter do more than allow you to tweet your thoughts? Probably not.
I am not a really big Twitter user at this time, but may plan to do more in the future. I don’t know. Sure it gives celebrities and news outlets the ability to instantly say what is on their mind, but what is that really worth? You get to follow the celebrities and/or news outlets to find out what is on their minds, but they don’t always follow you back. It is almost like being at the gate of a celebrity mansion. You can see it down the driveway, but you never really know what is going on inside.
Maybe I am in the minority by thinking that tried and true brick and mortar companies with nationwide retail outlets should be worth more than a website that allows you to tweet your thoughts 140 characters at a time, but I guess only time will tell.
The meat of the potatoes
Should you invest in Twitter? Will you make money if you invest in Twitter? The answer is who the hell knows. It might be up big today and down big tomorrow. The market will eventually settle on a decent valuation but who knows how long that will take. In the meantime there is something that you can do to make your decision to invest in Twitter easier: you can follow the M&P Twitter page! We Tweet all of our posts along with retweeting other people posts and/or articles that we find interesting. Sure, right now you are pretty much only getting a tweet from us when new articles are up, but who knows what will be tweeted in the future. It’s probably best to just join now because you might be missing out on some big 140 character announcement in future tweets.
Our good friend Anton over at the Dreams Cash True blog is offering his new ebook titled 7 Steps To Financial Freedom for free if you join his newsletter. It has a beefy 55 pages full of good financial advice and is very well designed. It is loaded down with great advice such as a 7-step plan to financial freedom, a detailed step-by-step action plan and other ways you can save money on a daily basis . We definitely recommend giving it a read.