So Twitter will be a publicly traded company, and will give us couple new billionaires. Beneath the surface of the launch, there are a couple of interesting… shall we say anecdotes? They give a different -and often missed- insight into the markets. Since I’m all for the different perspective on things, here are two things that didn’t stand out about the upcoming Twitter IPO:
Despite having a market evaluation of 12.8 billion dollars, it turns out that Twitter so far has not made any money. This is not exactly unusual for tech stocks, and for anyone who thinks in 140 characters it shouldn’t come as a big surprise: there’s no advertising on the platform. All “free” online services are financed by advertising -which includes facebook and Google-, so unless Twitter is using invisible ads (aimed at invisible people, I presume), there shouldn’t be any surprise it isn’t turning a profit.
That begs the question: then why is it worth so much money? Twitter so far has not announced that they will be including advertising. How exactly do investors expect the company to make money, and therefore generate a profit from investing in it?
Be a twit not a tweet
Well part of the answer might be in Tweeter Home shares, which skyrocketed on Friday. Apparently some traders had investigated their investment so well they were confusing Twitter with Tweeter… I mean, it’s not all that hard to make the mistake. After all, you do Tweet with Twitter. But over 11 million shares were traded in a single day. You’d expect someone who was going to buy eleven million of anything would like to be sure of what they were buying. Or at least several someones.
Sure, the price of the stock was in the penny range (what? They didn’t notice Twitter was a penny stock?), because it was bankrupt. Yep, 11 million shares of a bankrupt company were traded in one day. According to my possibly faulty math, somewhere around a $1 million was traded in Tweeter Home. You’d at least expect someone to know the name of a company they were about to drop a million dollars into.
Does this say anything about the market?
Probably not. But it reminds me of Francisco d’Anconia: “All they had to do was look at the ticker tape and it told the whole story.” How much diligence are traders putting into the the investments they are making? How much of the market is designed around making a profit off the movement of the stock, and not the underlying value of the asset?
I get it that there are fads, and Tech stocks are still in style. But how much confidence does it inspire if investors are judging businesses like a new blazer or tie? I don’t know. I just remember people were disappointed with facebook’s performance following its IPO. And I’m kinda disappointed I didn’t buy some Tweeter Home shares on Thursday.