Twitter makes its market debut

Microblogging website Twitter generated feverish excitement among investors ahead of its flotation.

Twitter launched its initial public offering (IPO) this week, marking the biggest technology flotation since Facebook in May 2012. Shortly before it floated, it raised its estimate of its shares' value by 25% amid high demand, saying they would sell at over $23. That valued the micro-blogging site at around $14bn.

Twitter is selling 13% of the company, which will raise around $2bn. Twitter is seven years old and has yet to make a profit. Breakeven is expected in 2015. It has 218 million monthly users.

What the commentators said

But amid all the "hoopla" surrounding Twitter's IPO, only one thing really matters, said Miriam Gottfried in The Wall Street Journal: the group's revenue growth. Some analysts reckon it can grow sales six or sevenfold over the next five years.

Investors should treat Twitter with caution, said Economist.com's Schumpeter blog. Revenue forecasts look a stretch, given that its growth in the US is slowing and it is generating far less revenue from foreign users, who make up 80% of its audience.

What's more, the group "has been coy about exactly how its advertising machine will be able to generate" the huge revenues underpinning the "lofty" valuation implied by its IPO price. The price-to-sales ratio of around 26 is around the same level as Facebook when it went public. The huge excitement generated by this week's IPO could fade quickly.

Recommended

The British equity market is shrinking
Stockmarkets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019
Tech stocks show why they're the new safe haven
Tech stocks

Tech stocks show why they're the new safe haven

As global stockmarkets tumbled this week, high-flying tech stocks such as Apple and Amazon gained again.
25 Sep 2020
Markets wobble on second-wave fears
UK stockmarkets

Markets wobble on second-wave fears

Speculation about a new lockdown in Britain saw the FTSE 100 slide 3.4% on Monday, its worst one-day loss since June.
24 Sep 2020
Snowflake: a very special IPO
Tech stocks

Snowflake: a very special IPO

The price of US technology company Snowflake, which floated last week, shot up by more than 150% at one point during the first day of trading.
24 Sep 2020

Most Popular

How the stamp duty holiday is pushing up house prices
Stamp duty

How the stamp duty holiday is pushing up house prices

Stamp duty is an awful tax and should be replaced by something better. But its temporary removal is driving up house prices, says Merryn Somerset Webb…
25 Sep 2020
Can Rishi Sunak’s winter plan save the UK economy?
UK Economy

Can Rishi Sunak’s winter plan save the UK economy?

With his Winter Economic Plan, chancellor Rishi Sunak is hoping to support the economy through the dark months ahead as restrictions tighten again. Jo…
25 Sep 2020
The electric-car bubble could get an awful lot bigger from here
Renewables

The electric-car bubble could get an awful lot bigger from here

The switch to electric cars is driving a huge investment bubble. But that’s not necessarily a bad thing, says John Stepek. Fortunes will be made and l…
24 Sep 2020