Twitter Hits the Open Market

by Matt Klassen on November 8, 2013

The popular microblogging site Twitter is now a publicly traded company, and as expected investors have left reason and logic at the door for a chance to buy into this latest investment craze. In fact Twitter’s stock price surged in early trading yesterday, investors clamouring for a piece in a frenzy that saw shares rise 73 percent from an initial $26 to a high of $47.24, before settling—at the time of writing—in the $46 range.

As we mentioned previously, while Twitter is the hottest must-have stock on the market this season, the fact of the matter remains that Twitter, like Facebook, is a huge investment gamble, with criticism aimed at the company’s dearth of profits and lopsided business.

While it doesn’t come as a surprise to see Twitter’s stock surge on opening day, the proof of the strength of the Twitter brand will truly show itself over the next few days, as more fluctuation is expected.

On a positive note, regardless of what Twitter’s stock does from here on in, we can say it started better than Facebook, whose own IPO last year was hampered by glitches and issues that ultimately caused trading errors, a headache for investors and traders that later resulted in legal action against Nasdaq.

Facebook’s IPO was also plagued by the company’s decision to increase the number of shares available at the last minute, the over-valuation caused the social network’s house of cards to come crashing down, and it took Facebook almost a year to recover.

Now I’m not saying Twitter’s stock won’t experience a similar roller coaster like plummet back to earth, only that its done more to prevent such a dip than Facebook was able to.

Of course there are challenges facing Twitter, the most serious of which is the fact the company has yet to earn a single cent in profit. While the company generated $422.2 million in revenue during the first nine months of this year, the company ended up losing $133.9 million.

Another strike against the company is its “lopsided” business structure, one that sees 75 percent of the revenues generated from theUSfrom a company who has 78 percent of its user base overseas. Simply put, the company doesn’t know how to make money off most of its users, an investment warning sign to be sure.

But again, who cares about warning signs, about reasonable investment, about the future; what many investors care about is what’s hot, and there’s no question that today Twitter is the hottest thing out there…but just how long will that last?

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Written by: Matt Klassen. Follow by: RSS, Twitter, Facebook, or YouTube.

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