The indicative $45-47 opening price finally convinced me of getting out of (tech) stocks in general. We're talking about $20B valuation for a company which has never made money. I know "this is different", and it has a lot of users, and so on.
Biggest thing to remember is that this is an exit, the end for the early investors. As far as I'm concerned, that's all it is. To me, in a lot of ways, this is the "end" of Twitter (not as a company, necessarily) in the sense that everything changes now. All of the details of their financials are going to be exposed from here on out, for better or worse. It's no longer about just user acquisition, it's about making money to satisfy the many more shareholders that they are about to get. It'll be interesting to watch!
"Biggest thing to remember is that this is an exit"
Which is always interesting because regular people think about whether ideas make sense and investors think about whether they can simply get the idea to the point where a greater fool buys into it. At that point they are right and everyone who thought that the idea wouldn't work is wrong. Ironically.
no kidding. It's made money, and if we're still on the "people's data are valuable", usage habits and advertiser's stories suggest that Twitter's user data is a lot more useful for targeted advertising than things like FB are.
Maybe I'm old, but I'm still struggling to figure out if Twitter is a short-term fad, or a serious here-to-stay concept (and thus a company) in our lives. I like to imagine say a 10-15 year time frame, and if I think the company will still be around then.
Netflix, for example, at least has a business model which I see becoming pervasive 15 years down the line (on-demand entertainment over the internet). Of course I don't know if Netflix will be the company to dominate that business model 15 years down the line.
With Twitter, I am not yet convinced this has long-term value here, but maybe I don't get the value it has in other's minds.
(Not to mention that even if it is long term can it be profitable.)
The reason I think "no long term" is that in it's current incarnation it doesn't hold value for "normals" other than people who want to follow celebrities or of course the tech crowd. Or are obsessed with knowing the moment there is an earthquake on another continent. That's essentially entertainment. It's not something you need to know (in masses of course there could be individuals that need to monitor those things.)
I mean sure it is useful to be notified of some event that happens but personally I don't think the need for that is greater than the current alternatives of getting that information (or that a better way to get that information wouldn't be developed).
Most employed people with "regular" jobs are not all obsessed with twitter and the information that it delivers.
Netflix, otoh, delivers a product that people have received for many years by a better method. And the money making part is baked right into the product.
I feel like there's probably plenty of people outside of tech that fall within the "normals" bucket you're referring to that get value out of Twitter. I think their real problem (besides is it sustainable) is that it's not vital or irreplaceable. If Twitter went away tomorrow the people who would be hurt the most are the ones communicating out with it, not the ones consuming from it. And those are the people they are trying to monetize.
Think of how most of us here who work on SaaS platforms would try to monetize something like Twitter if we just thought it up today and Twitter had never existed. We'd probably put a pricing structure in place along the lines of "$x/mo per million followers" or "$x/mo per $y tweets".
I know plenty of people who like Twitter and use it regularly but it's something they check now and then and if they forget to or miss something it's not a big deal to them.
>> The reason I think "no long term" is that in it's current incarnation it doesn't hold value for "normals" other than people who want to follow celebrities or of course the tech crowd.
Do you watch CNN? Do you follow breaking news? Then Twitter has demonstrated value for "normals," as it's become the best platform for breaking stories (for better or for worse).
"Do you watch CNN? Do you follow breaking news? Then Twitter has demonstrated value for "normals,"
Look there are people that watch the nightly news every night. Enough people and enough value to advertisers that there is the nightly news. Forgetting though that that market is declining they have a monetization platform in place (partly by legacy because they were the only source of information so it just lives on) and partly because the format is such (tv commercials) that it provides value for advertisers.
The question with twitter is simply how much value can be delivered long term to people that follow (as one example) breaking news. And how much that can be monetized and become a profitable business model.
By the way part of CNN is the entertainment value that can keep an audience captivated for hours watching every last minute of storm or conflict or invasion coverage. It's infotainment that drives the bus there and makes the business model work. Highly crafted and entertaining.
I think Twitter addresses a great market, real-time communication and conversation, however, it is a very difficult market to monetize. The Telco's monetized communication by billing per minute or per month, but I don't think that would work for Twitter in the long term. They are likely limited creatively incorporating more advertising over-time and selling trend data.
It's not relevant to the price, but they had Patrick Stewart open the market with them. Well, having Captain Picard open the market shouldn't be relevant to the price anyway.
I know lots of people are against twitter because they're not yet making any money.
The thing about market prices on any market is that the price doesn't reflect what they're doing now. This isn't something thats 'different', it applies to everyone. It reflects what we all perceive they're capable of a couple of years from now.
I think twitter has a lot of potential because its something so simple and you would find an older audience more engaged in it. Quite simply put, people love it.
A $45 market price after a $26 IPO means Twitter left over $1B on the table, doesn't it? They would've had that money, instead of the first investors who can now immediately sell the shares at a huge profit, if the initial price was set closer to what the market would've paid.
Approximately $11B According to my quick calculations. TWTR market cap is at $25B currently. They sold 544.7M shares for $26, ~$14B in all. That leaves an $11B difference.
A question: In an IPO, does the company have to sell every share for the same price? As in a typical market, the price fluctuates based on demand. Couldn't they evaluate the demand for the shares and adjust their sell price higher to compensate, or is it part of the legal framework that they are required to sell all the shares at exactly the same price?
They sell the price at that price to the underwriting investment bank (who takes the risk) and they're done. Then the stocks are out there for people to trade. Twitter doesn't get money or lose money from the market price of the stock. They get more money when they issue/sell more stock.
Google tried to pioneer a Dutch auction IPO when they went public in 2004. Buyers would make bids for an amount of stock, and somewhat bypassing the banks, but it was less than successful.
The idea has never taken off, not yet anyway. It seems the banks still play an important role in marshalling large funds, and there's apparently significant benefit from a "hot" stock gaining on day 1 (albeit irrational).
I thought that it was mainly successful for Google, but that it was Google being such an insanely in demand stock that led to the success, not the auction itself. Basically, a Google IPO couldn't really fail. I do know that the banks hated it, and the only reason Google got away with it is because Larry and Sergey couldn't have cared less.
A Google IPO was always going to do well, which is part of the reason they felt they could take a gamble like that. But the stock doubled in 60 days [1], so "eBay for IPOs" didn't create anything like a perfect supply-demand scenario. Maybe it would be different now.
They only floated about 10% of their outstanding stock on a fully diluted basis.
Twitter (the company) could have raised more, but individuals who owned the stock before the IPO still see the gain, unless they did a secondary market offering.
Given the dangers of overpricing, it's a price worth paying.
(If the stock falls in value on the first day of trading, it may lose its marketability with investors and hence even more of its value.)
I've always noticed that there is sometimes a correlation between those that make money and those that can understand what a "sucker" will go for.
What I mean is that many people make money by understanding the stupidity of people and taking advantage of that.
As opposed to thinking all logically with intelligence as far as why would someone pay me to do that! It's so simple!
An example of this (that might hit home to the tech crowd) is a "tech guy/gal" who under prices what they do thinking it is simple to install open source software on someone's box. Instead of realizes that to a "normal" it's a big ball of confusion and they would be quite pleased to just have an installed turnkey product with 5 minutes of handholding.
I can't stress this enough. You get paid for what you know that someone else's doesn't know. And you deserve to. So don't give it away without getting paid.
Can you explain this? Do you believe that public companies can't play a role in world events? Seems like this is contradicted by any number of public companies.
It doesn't follow, actually. It is my guess that the IPO will lead Twitter to temper its willingness to serve as a communications medium for events like the Arab Spring, but I could be mistaken--even sadly mistaken.
I'm incredibly ignorant when it comes to the stock market. But why would any company elect to go public? Let's see: you lose your creative edge 90% of the time, you destroy the relationships with your users 50% of the time, your team vision becomes one that must equate to profits - forever. This is not natural - to be constantly growing and profiting. Small businesses (you know, the millions of them) seem to hold their ground better in turbulent times, despite their lack of hand-over-fist profits.
This idea of unlimited growth is unsustainable and people who can't see that are just as bad as a 2008-era stock broker as far as I can see. It's a very willing and eager group of apologists and utopian dreams. Honestly.
Because that's how all of the original investors cash out. They originally purchased shares in the company to invest in it. The original investment went to the company itself. For argument sake, let's say they purchased those shares originally for $5 each. Now that the company is public, they can sell those shares on the open market for $45 each. The IPO is a combination of the company selling more shares to shore up its cash on hand, and for original investors to be able to sell their shares at a profit.
You go public to raise a large amount of capital. No venture investor is going to give you billions of dollars.
For instance, Twitter just raised 1.8 billion in CASH. Presumably this is for them to scale up their operations. This is why public markets exist, and this is why companies go public.
You get to turn pieces of paper which say "I own x% of TWTR" into pieces of paper which say "I own $y". A lot of people are happy to make that trade, especially if they don't think their ownership of the company is worth the amount of money that people are willing to pay for it.
As for the people who actually just work at Twitter, or who run Twitter? Well, you certainly get a lot more money to work with so long as your stock price doesn't collapse. You no longer have to go lobby certain individuals for money as much as you used to. Sure, you have to focus on making profits now, but that was always kind of the point, right? That doesn't mean you have to be short-sighted. Just look at a company like Amazon for an example of how a patient company can still command a high stock price and respect even when they're not pumping out huge profits.
Also, the vast majority of small businesses are abject failures. Most economic growth occurs through the activity of massive corporations (from the business side of things).
At least, that's my understanding. Feel free to point out if I'm full of shit, please.
Interesting - although it's worth pointing out that it's about half of private sector GDP, not half of US GDP. Also, I'm not sure I'd call a business with over 100 employees "small", but I guess that's the definition they're going with.
Also, while they're a government agency and cite their sources, their job is to advocate for small businesses. Does anyone else have more sources to look at?
All of the money-related reasons others have talked about are valid, but there are also some legal reasons where you have to go public (such as a certain number of shareholders, which comes into play when companies give stock options as compensation). Facebook would still be private if they legally could have delayed any longer, I believe. You are entirely right that there are huge advantages to being private in a lot of cases.
Regarding the profitability piece, they closed their mopub acquisition this week - something i believe will make or break the future of TWTR reopvenue... I believe the money is on that piece to perform or the company is dead in the water.
MoPub is the key for Twitter, I agree. It offers them a way to jump in as the leader in multi-touch/multi-device attribution, something that marketers will pay through the nose for (I know I would). I'm really interested to see what they do with it.
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[ 3.5 ms ] story [ 124 ms ] threadStill, I'd be cautious.
Which is always interesting because regular people think about whether ideas make sense and investors think about whether they can simply get the idea to the point where a greater fool buys into it. At that point they are right and everyone who thought that the idea wouldn't work is wrong. Ironically.
http://www.businessinsider.com/what-the-heck-is-wrong-with-t...
https://www.google.com/finance?q=NYSE%3ATWTR&fstype=ii&ei=TL...
EDIT: Wow! Who are the people buying this at $49 a share?!
Netflix, for example, at least has a business model which I see becoming pervasive 15 years down the line (on-demand entertainment over the internet). Of course I don't know if Netflix will be the company to dominate that business model 15 years down the line.
With Twitter, I am not yet convinced this has long-term value here, but maybe I don't get the value it has in other's minds.
(Not to mention that even if it is long term can it be profitable.)
The reason I think "no long term" is that in it's current incarnation it doesn't hold value for "normals" other than people who want to follow celebrities or of course the tech crowd. Or are obsessed with knowing the moment there is an earthquake on another continent. That's essentially entertainment. It's not something you need to know (in masses of course there could be individuals that need to monitor those things.)
I mean sure it is useful to be notified of some event that happens but personally I don't think the need for that is greater than the current alternatives of getting that information (or that a better way to get that information wouldn't be developed).
Most employed people with "regular" jobs are not all obsessed with twitter and the information that it delivers.
Netflix, otoh, delivers a product that people have received for many years by a better method. And the money making part is baked right into the product.
Think of how most of us here who work on SaaS platforms would try to monetize something like Twitter if we just thought it up today and Twitter had never existed. We'd probably put a pricing structure in place along the lines of "$x/mo per million followers" or "$x/mo per $y tweets".
I know plenty of people who like Twitter and use it regularly but it's something they check now and then and if they forget to or miss something it's not a big deal to them.
Do you watch CNN? Do you follow breaking news? Then Twitter has demonstrated value for "normals," as it's become the best platform for breaking stories (for better or for worse).
Look there are people that watch the nightly news every night. Enough people and enough value to advertisers that there is the nightly news. Forgetting though that that market is declining they have a monetization platform in place (partly by legacy because they were the only source of information so it just lives on) and partly because the format is such (tv commercials) that it provides value for advertisers.
The question with twitter is simply how much value can be delivered long term to people that follow (as one example) breaking news. And how much that can be monetized and become a profitable business model.
By the way part of CNN is the entertainment value that can keep an audience captivated for hours watching every last minute of storm or conflict or invasion coverage. It's infotainment that drives the bus there and makes the business model work. Highly crafted and entertaining.
http://twitteripo.knowsis.com
The thing about market prices on any market is that the price doesn't reflect what they're doing now. This isn't something thats 'different', it applies to everyone. It reflects what we all perceive they're capable of a couple of years from now.
I think twitter has a lot of potential because its something so simple and you would find an older audience more engaged in it. Quite simply put, people love it.
The idea has never taken off, not yet anyway. It seems the banks still play an important role in marshalling large funds, and there's apparently significant benefit from a "hot" stock gaining on day 1 (albeit irrational).
1. http://www.marketwatch.com/story/google-ipo-has-doubled-afte...
Twitter (the company) could have raised more, but individuals who owned the stock before the IPO still see the gain, unless they did a secondary market offering.
Given the dangers of overpricing, it's a price worth paying.
(If the stock falls in value on the first day of trading, it may lose its marketability with investors and hence even more of its value.)
What I mean is that many people make money by understanding the stupidity of people and taking advantage of that.
As opposed to thinking all logically with intelligence as far as why would someone pay me to do that! It's so simple!
An example of this (that might hit home to the tech crowd) is a "tech guy/gal" who under prices what they do thinking it is simple to install open source software on someone's box. Instead of realizes that to a "normal" it's a big ball of confusion and they would be quite pleased to just have an installed turnkey product with 5 minutes of handholding.
I can't stress this enough. You get paid for what you know that someone else's doesn't know. And you deserve to. So don't give it away without getting paid.
This idea of unlimited growth is unsustainable and people who can't see that are just as bad as a 2008-era stock broker as far as I can see. It's a very willing and eager group of apologists and utopian dreams. Honestly.
For instance, Twitter just raised 1.8 billion in CASH. Presumably this is for them to scale up their operations. This is why public markets exist, and this is why companies go public.
As for the people who actually just work at Twitter, or who run Twitter? Well, you certainly get a lot more money to work with so long as your stock price doesn't collapse. You no longer have to go lobby certain individuals for money as much as you used to. Sure, you have to focus on making profits now, but that was always kind of the point, right? That doesn't mean you have to be short-sighted. Just look at a company like Amazon for an example of how a patient company can still command a high stock price and respect even when they're not pumping out huge profits.
Also, the vast majority of small businesses are abject failures. Most economic growth occurs through the activity of massive corporations (from the business side of things).
At least, that's my understanding. Feel free to point out if I'm full of shit, please.
http://en.wikipedia.org/wiki/Small_business#Contribution_to_...
Here's the full PDF of that source: http://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf
Also, while they're a government agency and cite their sources, their job is to advocate for small businesses. Does anyone else have more sources to look at?