6th November 2013
So will Twitter be like Groupon or Facebook or LinkedIn the investment and technology websites ask. The short answer Twitter is Twitter. The long answer is that apart from the fact that all four stocks are enabled by the internet, there is a huge difference between all of them writes John Lappin.
Facebook is a social media stock where people exchange all sorts of ideas and information. Groupon offers vouchers and has huge global reach, but it was already looking a little green around the gills long before it listed. LinkedIn is another useful business networking and communications tool. But Twitter is none of these. It is a microblogging site so comparisons, if not quite odious, may be slightly fatuous.
Now depending on what sort of investor you are, you may be interested in one thing these stocks have in common. The amount of interest they generate because of just how far they have got into the public’s conscience can help them generate huge demand. There may be a risk of hype but it may mean that taking part in an IPO or in the early days of a listing makes sense. Well unless the hype busters and myth busters do their job.
At Mindful Money, we would refer you however, to a very interesting article by 7IM’s Justin Urquhart Stewart on Mindful Money just a month ago, in which he urged investors to understand the nature of the IPO – whether it was to extract money for management or to provide money for growth.
So where does Twitter sit in all this? Well clearly it has global ambitions, or perhaps more accurately even more global ambitions, and it wants to fund them. Clearly, it is interested in raising as much money as possible and the management don’t look like they are off on sabbatical any time soon.
We also think this is a quote from the RCM Technology investment trust Walter Price. Now please note this comes from a briefing, he gave several weeks ago. But it is an interesting frame through which a potential investor might care to view the stock.
A few weeks back, Price said: “I like Twitter. I like the management of Twitter. It’s an important part of news, the best way to get breaking news. They are figuring out how to monetise it, for example 15 second videos have gotten very popular. Twitter isn’t yet a platform that is broad like Facebook. It fits into a mobile application. They can monetise that news stream but if it is only news, if it is only people that are tweeting, it won’t be a giant company but it will be a successful one in the category of news and following famous people.”
Given the world in which we live ‘following news and famous people’ makes for a significant business.
Yet this week, the Guardian reported some investor scepticism about Twitter’s long term prospects particularly among better off investors stateside. Nevertheless New York Times Dealbook suggests Twitter will list at perhaps $26 a share and around a valuation of near $14bn.
So what should you do? Actually much depends on your time horizon. If you are not buying now, then you may have a while to decide what sort of stock Twitter is and which companies you want to compare it with.
If you are hoping to win from the IPO itself – good luck with that. If you are a longer term investor remember initial investors in Facebook did badly but are much, much happier now. But then again, it’s not Facebook, it’s Twitter.