Twitter Inc.’s rise is an extraordinary story. In spite of all the confusion and being a small start-up company, it somehow managed to become a legitimate and proper business. Recently Twitter made its debut on the New York Stock Exchange amidst a lot of excitement and speculation. But be a little cautious before you get carried away by the mass frenzy to invest in the Twitter Stock.
Experts say that there’s always a distinct danger in IPOs, particularly big-name tech IPOs, which are governed more by mass hysteria than any kind of rational assessment of long-term potential. And, one thing that many people out there don’t know is that Twitter has never seen financial success because it has never shown any profits since its inception. This is a company that has been made popular particularly by users and not the company people. Many of Twitter’s famous functions, like @-replies and hashtags, were created by users, not the company.
The social messaging service’s net loss widened to $69 million in the first half of this year, from a net loss of $48 million in the same period a year earlier. As for being a stable business, Twitter is still in its initial stages, and market analyst points out that its IPO filing isn’t entirely clear about how Twitter really plans to make money. Many feel that maybe it’s too early for a company like Twitter to go public, but perhaps right now the investment environment is good and Twitter just couldn’t resist.
“Stay away,” says The Daily Ticker’s Henry Blodget. “At $45, Wall Street Journal is assuming that Twitter is going to do about $3 billion of revenue in two years… That’s possible, but I don’t think it’s likely.”
Stay away from Twitter’s stock is the message to clients from a group of selected financial advisors polled by CNBC. A recent AP-CNBC poll showed nearly half of the active investors—those who had adjusted their holdings within the last year—say that Twitter would not be a sizeable investment. That sentiment is stronger from higher-income respondents; some 56 percent of those with incomes of $75,000 a year have doubts about its investment prospects.
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