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HindustanTimes Thu,02 Oct 2014

Technology

In IPO, Twitter seeks to be 'anti-Facebook'
AFP
Washington, October 04, 2013
First Published: 23:55 IST(4/10/2013)
Last Updated: 23:56 IST(4/10/2013)

Twitter's $1 billion stock offering suggests a cautious Wall Street debut by the popular messaging platform, careful to avoid the mistakes made by its larger counterpart Facebook last year, say analysts.
   
"The surprise is that they are doing such a small deal," said Michael Pachter, director of equity research at Wedbush Securities who follows tech companies.
   
"I think that's smart of them. The mistake Facebook made was they flooded the market with shares."
   
Twitter initial public offering (IPO) unveiled Thursday indicates the shares offered will be a relatively modest percentage of what Wedbush estimates as a valuation of around $15 billion.
   
Twitter did not give a date for the IPO but said it would take place as "soon as practicable."
   
Pachter noted that the "relatively small initial public offering is intended to avoid the issues experienced by Facebook when it offered approximately $16 billion in stock, far more than the market appeared willing to absorb."
   
He added that Twitter and early investors appear to be "patient" and will wait before selling shares, to ensure the supply is limited.
   
"I think this is being handled masterfully," he told AFP.
   
Lou Kerner, founder of the Social Internet Fund, said investor interest will be high because social media is "red hot" but that Twitter still has some leaning to do to make it more ubiquitous.
   
"A lot of people go to Twitter and find it difficult to immediately get value from it," he said.
   
"That's not because it's not to be had, but it's not as easy as with Facebook."
   
Other analysts meanwhile point out that the numbers provided in Twitter's IPO filing failed to live up to the most optimistic estimates for growth in users and revenues.
   
Twitter disclosed that it had 218 million monthly active users as of June 30 in a 44 percent increase from the same point a year earlier. It reported that it lost almost $80 million on some $317 million in revenue in 2012.
   
Twitter brought in $253.6 million in revenue in the first half of this year, but remained in the red with a loss of about $69 million.
   
"I think they are still very early in the value proposition of what they are offering," said Kerner.
   
Kerner noted that the number of active users "is still a huge user base, its only because of Facebook's reach that we look at 200 million and aren't as impressed."
   
Shea Bennett, who edits the All Twitter blog, which monitors the social media site, said the figures in the filing were "pretty underwhelming."
   
"For me, the biggest disappointment was Twitter's slow rate of active user growth," Bennett wrote.
   
He said the chart provided by Twitter shows "a jump of just 14 million actives, or 6.8 percent, since March. What does this slow acquisition of sign-ups mean for Twitter's future?"
   
John Battelle, an Internet entrepreneur who helped launch Wired magazine and founded the online ad exchange Federated Media Publishing said Twitter's revenue growth is "impressive" even if it does not quite measure up in some respects to giants like Google and Facebook ahead of their IPOs.
   
Battelle said Twitter is profitable on the basis without counting items such as debt and amortization, "which is good, but not spectacular."
   
"So from a financial point of view, Twitter's no Google. But it's no slouch, either," he wrote on his blog.
   
"It'll be very interesting to see what the company's third quarter filings look like. My guess is they'll be very strong -- the company is far too smart to plan it any other way."
   
Trip Chowdhry at Global Equities Research argued meanwhile that investors should be highly cautious about putting money in the volatile sector.
   
"I think the optimism in Twitter is misplaced," he told AFP.

"Twitter is a great company but at terrible valuations."
   
Chowdhry said he would value Twitter at no more than $3 billion, given "brutal competition" and hints that Internet users are turning to more "visual" social networks such as Pinterest, and Facebook's Instagram.
   
"I think the Twitter IPO marks the peak of the company, not the starting point of growth," he said.
   
Chowdhry said he also is looking for more disclosure from Twitter about its revenues, particularly whether its early investors are also among its advertisers. He said these kinds of relationships were problematic in the dot-com boom and bust.
   
"We cannot make a judgment about the quality of the revenues," he said. 


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