Twitter, Inc. joined the New York Stock Exchange on Wednesday, Nov. 6, 2013, (NYSE: TWTR) priced at $26 per share for a market cap of $14.4 billion. By Thursday, shares were up 80% making it the biggest tech initial public offering since Facebook. Comparatively, the average one-day pop for U.S.-listed IPOs this year is 17%, with six companies doubling in their first day of trading.
The company is seven years old, with 232 million monthly active users; however, the company is still not profitable. It posted a loss of $134 million in the first nine months of the year, nearly double last year’s loss. Revenue more than doubled to $422 million for the nine months ended Sept. 30. The number of active users grew 6% from second to third quarter, but was down 7% in the second quarter and 10% in the first quarter.
The company derives 70% of revenue from mobile devices. About 75% of Twitter’s users are abroad, but only 25% of its revenue comes from abroad. Most of the company’s revenue comes from advertising, which breaks down to about 85% from ad sales and promoted tweets, while the remainder comes from licensing data.
The fact Twitter has been able to capitalize on its mobile advertising gives it an edge over Facebook. Twitter is seen as a conversation starter and communication service for news outlets and advertisers, while Facebook is not. However, technology moves fast. If Twitter will be relevant in five years remains to be seen. The IPO has given Twitter cash that may allow them to acquire other companies, which could make them a powerful tech company. How the company manages the next few years will determine its success.
Without much clarity on how the company intends to make a profit, we recommend avoiding this IPO. At Henssler Financial we believe you should Live Ready, which includes understanding how your investments make their money. If you have questions regarding one of your stock holdings, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
