Yep, time after time I carefully plot out a short and don't have the balls to go through with it. I've lost millions on paper at this point. :) Sigh. :(
An $18 billion valuation for a company with dramatically accelerating losses, currently at the rate of over $20M per month. What could possibly go wrong there?
Personally, I would shy away from both of them. If you really want to be in one of these companies, at least Facebook has earnings and scale. I've never liked twitter and get no value out of it, so perhaps I'm the wrong guy to ask, but I suspect Twitter is headed the way of MySpace.
I don't think the use of the word "safe" or any derivative of it is appropriate with the shares of any publicly-traded social media company.
That said, even though Twitter's valuation looks quite rich at $26/share from a financials perspective (to say the least), I think some investors who have (or want) positions in social media companies are considering Twitter's demographic profile, which also happens to be Facebook's biggest potential Achilles heel.
The fact that Twitter is seen by some as a benefactor of Facebook's growing teen attrition may not be a wise rationale for a Twitter investment, but if you're hell bent on taking a cruise on the Titanic, why not rearrange the deck chairs to get yourself a view that's more to your liking?
It is, of course, not a mutually exclusive situation. But to your point about demos, if you look at the data it paints a different picture than what you've suggested. As an investor in FB (not that that makes me special) I read the Piper Jaffrey report that I presume you're citing. What it overlooks is that FB owns Instagram. Where FB is weak demographically, Instagram is strong.
Moreover, FB's value has never been strength among the youngest demographic. Sure, hooking a user early is great but hardly the only path to acquisition. Just ask my mom. Or, probably, your own.
And feel free to use whatever language you want. I stand by what I said.
Possibly. Once Instagram's number of users (150 million) hits Twitter's number of users (232 million) it won't be looking so good for Twitter, if Instagram continues to grow. Maybe Twitter will take over SnapChat (26 million users) though. Twitter just isn't gaining, they seem pretty stagnant, taking over a younger company could give them some growth.
The comparison to Instagram is interesting. I used to do some marketing on Vine. Our traffic from Vine dropped more than 90% in less than 1 week after Instagram introduced video. That's how fast a replacement for Twitter could gobble up its business as well. IMO, Twitter is better suited as a feature, not a product, and definitely not an $18 billion company.
They're selling 70M shares, aiming to raise approx. $1.8B. However, there are over 700M fully diluted shares. At $26 a piece this makes a total valuation of $18B.
Really? You're going to trot out the age-old HN aversion to loss-making? It's time for HNers to learn that ambitious companies that know how to invest resources SHOULD be making losses. IPOs are fundraising events. The capital is expected to be invested into the business to drive further growth. When companies lose the ability to invest at acceptable returns, then you might see them shift the balance to profit-making.
Sure, the price doesn't matter much to a retail investor. But millions of shares will be bought tomorrow at that price so it certainly means something to the right people.
Yes, they are both useful and relevant when used in combination but alone stock price is pretty meaningless.
Before Berkshire Hathaway issued a stock split (1 share becomes 2 or more shares) a share was worth ~$172,000. Today Apple trades at $520 and MSFT at $38.
Alone those numbers are of no use. You don't know how much the actual company is worth. Share price * share volume = Market Cap. You need to know at least two of those values to make an informed decision.
What? It means a lot, starting with how much money twitter will raise. Then it suggests a rough valuation (at usually a modest discount) to what institutional investors think the company is worth.
His point is price means nothing except in the context of how many shares there are, but yet the amount of shares is never talked about only the price. 200 shares at 100 dollars means nothing but 1 million shares at 100 dollars means much more.
It's reported because the other big tech IPO recently was Facebook, which went from ~$40 down to ~$20, back up to ~$50. They're trying to provide a reference point to the other major social networking company on the stock market.
Of course anyone with a bit of sense knows that it's not the individual share price that matters; but with something as famous as Twitter, that is not necessarily who you are marketing the IPO at.
The reason is that the per-share value is best for people who already own or follow the stock.
For example, Twitter employees can quickly ballpark the dollar value of their shares with the $26 number. It's also easier for tracking movement (e.g., $20 last week, $26 this week).
It's the same reason that all ticker prices are in per-share value rather than market cap. $XOM at $93.22 means less to me personally than "Exxon Mobil is worth $400 billion," but the per-share value is probably most relevant to people with business interest in Exxon.
The market conditions this past week or so have been rough on tech stocks. I'm sure it's not what Twitter management would consider ideal, but pulling an IPO is a very drastic move. As is, anything could happen tomorrow.
Ok, maybe? But do you really think that's what's happening? More likely, I think a generally underwhelming earnings season has deflated a few of these momo stocks.
I think that's a little naive. The market cap of twitter does not make up for the losses in tech over the last 2-3 weeks. And that's as-if there is no new money in the game, that to buy one stock you have to sell the rest. Which means paying taxes. Not for macro reasons but JUST to buy a new offering?
Twitter is not the only big IPO. There is no pattern of market turndown in the lead up to an IPO. The whole idea is a bit silly to me.
2-3 weeks? I was thinking just the day or two before actually, and only the handful of really popular tech stocks. Thanks for your patronizing put down though.
Twitter IPOs at $26/share with 700 million shares. Facebook ipo'ed at $38/share with 2.55 billion shares. Mathematically, Twitter's IPO is about 1/4 the value of Facebook.
Twitter has 200 million active users
Facebook has 1.15 billion active users
I don't think twitter is worth 1/5 the market cap of Facebook. It doesn't have photo albums, groups, calendars, events that facebook does, and twitter still has a long way to go for mobile. Most of my friends uses a third party tweet client (like tweetbot) and don't even have twitter's app installed.
Therefore, I think Twitter is very much overpriced. Did I miss something?
Right, exactly, it's a supply and demand thing. You have X shares trading on the market, and all of a sudden you have something like 3 or 4 * X shares trading hands. Unless there are, all of a sudden, a commensurate number of new share purchasers, it'll drive the price down.
What are you expecting at that point? FB's major lockup expiration (Nov 14 2012) was preceded by a dip a few days prior (not the lowest price in the previous few weeks though) and then went up on the lockup date.
Are you expecting a similar drop as news articles go out about the pending lockup a week/days before, followed by it going up after some people realise everyone knew about this all along?
FB had three lockup expirations and the first two caused dips.
And, essentially, yes. Most lockup expirations, in my experience, seem cause a meaningful dip in the company's stock price. This happened with Zillow a couple years ago, it just happened to Tableau last week, and it happened twice to FB, and those are just the examples I can think of off the top of my head.
Twitter 2007: Who wants to post status messages which are limited to 140 characters
Twitter 2010: Who wants to invest in a company which limits status messages to 140 characters
Twitter 2013: Who thinks $26/share is a viable price for a company which limits what people say to 140 characters, has no photo albums, events and all of facebook's features (hint: Twitter is not Facebook)
That's all fine and dandy but the proof of the pudding lies in a successful monetization strategy. From where I'm sitting, I just can't see how they're ever going to convince enough people to pony up (directly or indirectly) for what is, at its core, an artificially constrained public sms service (that thus far they've been accustomed to using for free).
In a sane world I don't think there will be enough of them to stem the losses and deliver a solid return on an IPO that values the company in the double digit billions. Happy to be wrong but only time will tell.
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[ 3.1 ms ] story [ 122 ms ] threadWhat I'm actually doing is something completely illogical.
I wouldn't have thought it would affect the overall shorting effect too much either.
http://www.investopedia.com/ask/answers/05/062905.asp
That said, even though Twitter's valuation looks quite rich at $26/share from a financials perspective (to say the least), I think some investors who have (or want) positions in social media companies are considering Twitter's demographic profile, which also happens to be Facebook's biggest potential Achilles heel.
The fact that Twitter is seen by some as a benefactor of Facebook's growing teen attrition may not be a wise rationale for a Twitter investment, but if you're hell bent on taking a cruise on the Titanic, why not rearrange the deck chairs to get yourself a view that's more to your liking?
Moreover, FB's value has never been strength among the youngest demographic. Sure, hooking a user early is great but hardly the only path to acquisition. Just ask my mom. Or, probably, your own.
And feel free to use whatever language you want. I stand by what I said.
Possibly. Once Instagram's number of users (150 million) hits Twitter's number of users (232 million) it won't be looking so good for Twitter, if Instagram continues to grow. Maybe Twitter will take over SnapChat (26 million users) though. Twitter just isn't gaining, they seem pretty stagnant, taking over a younger company could give them some growth.
http://triblive.com/business/headlines/5012201-74/twitter-co...
Sure, the price doesn't matter much to a retail investor. But millions of shares will be bought tomorrow at that price so it certainly means something to the right people.
Twitter Prices IPO At $26 Per Share
or
Twitter Prices IPO At $18 Billion Valuation
Before Berkshire Hathaway issued a stock split (1 share becomes 2 or more shares) a share was worth ~$172,000. Today Apple trades at $520 and MSFT at $38.
Alone those numbers are of no use. You don't know how much the actual company is worth. Share price * share volume = Market Cap. You need to know at least two of those values to make an informed decision.
Of course anyone with a bit of sense knows that it's not the individual share price that matters; but with something as famous as Twitter, that is not necessarily who you are marketing the IPO at.
For example, Twitter employees can quickly ballpark the dollar value of their shares with the $26 number. It's also easier for tracking movement (e.g., $20 last week, $26 this week).
It's the same reason that all ticker prices are in per-share value rather than market cap. $XOM at $93.22 means less to me personally than "Exxon Mobil is worth $400 billion," but the per-share value is probably most relevant to people with business interest in Exxon.
Twitter is not the only big IPO. There is no pattern of market turndown in the lead up to an IPO. The whole idea is a bit silly to me.
Twitter has 200 million active users Facebook has 1.15 billion active users
I don't think twitter is worth 1/5 the market cap of Facebook. It doesn't have photo albums, groups, calendars, events that facebook does, and twitter still has a long way to go for mobile. Most of my friends uses a third party tweet client (like tweetbot) and don't even have twitter's app installed.
Therefore, I think Twitter is very much overpriced. Did I miss something?
https://blog.twitter.com/2013/celebrating-twitter7 http://thenextweb.com/facebook/2013/07/24/facebook-users-q2-...
First, the IPO is 18% as big as Facebooks, not 25%.
Second, if Twitter closes at this $26 share tomorrow, it will have a market cap about 15% the size of Facebook.
The breakdown looks more like this:
Facebook at IPO: MAU: $845M [1], Valuation: $104B [1], Value/User = $123
Facebook Today: MAU: 1.15B [2], Valuation: $120B [3], Value/User = $104
Twitter at IPO: MAU: 218M [4], Valuation: $18.1B [5], Value/User = $83
[1] http://en.wikipedia.org/wiki/Initial_public_offering_of_Face...
[2] http://thenextweb.com/facebook/2013/07/24/facebook-users-q2-...
[3] https://www.google.ca/finance?q=NASDAQ:FB
[4] http://techcrunch.com/2013/10/03/blindtweeting/
[5] http://techcrunch.com/2013/11/06/twitter-prices-ipo-at-26-pe...
My guess is that the price drops because of so many employees selling at once, but I don't pretend to understand finance.
Are you expecting a similar drop as news articles go out about the pending lockup a week/days before, followed by it going up after some people realise everyone knew about this all along?
And, essentially, yes. Most lockup expirations, in my experience, seem cause a meaningful dip in the company's stock price. This happened with Zillow a couple years ago, it just happened to Tableau last week, and it happened twice to FB, and those are just the examples I can think of off the top of my head.
Twitter 2010: Who wants to invest in a company which limits status messages to 140 characters
Twitter 2013: Who thinks $26/share is a viable price for a company which limits what people say to 140 characters, has no photo albums, events and all of facebook's features (hint: Twitter is not Facebook)
Depends on how many shares exist, doesn't it? A year ago, MSFT was near $26/share. That number is meaningless by itself.