Monday, October 07, 2013

Everyone's All a-Twitter

But I don’t buy this for a moment:

Twitter Inc.’s user growth is slowing and it shows no sign of turning a profit. Some fund managers say that’s not going to stop the microblogging service’s $12.8 billion valuation from treading higher. Much higher.

The $12.8 billion figure is derived from the fair value that Twitter put on its shares in an initial public offering filing last week. Ironfire Capital LLC and Gamco Investors Inc. (GBL) project the San Francisco-based company could be worth $15 billion to $20 billion once it begins trading.

Twitters expect to offer its initial shares at around $20 ps. I think that’s overpriced for a firm that’s never shown a profit, and makes it way too easy to dismiss advertising from your feed, and has some serious liability exposures on the horizon, from harassment suits to slander and libel claims.

Unlike Facebook, which actually had some commercial potential (and I called that one last year, saying the stock would linger in the $20s for a long time, which it did, from October until July of this year. I still think it’s overpriced now.) I don’t see where Twitter can sell products. I’d be guessing here, but my sense is a majority of users tweet from their phones now, and it’s hard to load a website while staying on the Tweeter.

My money would be on it hitting $8 a share before it ever shows a profit and starts to climb up, but also, keep in mind that the 1990s saw a lot of IPOs for vaporware stocks that ended up crashing the economy in a show of irrational exuberance on the part of investors.