At the end of Thursday's trading session Twitter, a microblogging social platform, which some argue is currently valued at around 10 billion dollars disclosed information with regards to their IPO. In a tweet to its various followers the site announced,
"We've confidently submitted an S-1 to the SEC for a planned IPO. This tweet does not constitute an offer of any securities for sale."
The following will briefly delve into the potential of Twitter's IPO as well as discuss how it could be a nice investment for short-term traders.
Twitter currently maintains an active user base of over 288 million users and is currently the fastest growing social media platform, with an estimated 40% increase in its members between Q2 and Q4 of 2012 alone. In addition the total number of individuals who own Twitter accounts (but do not use them regularly) has just surpassed 500 million. Next to LinkedIn (NYSE:LNKD), Twitter has the least amount of employees per user among the primary social platform Goliaths, which means that their overall employment costs can be compared to those of LinkedIn when estimating their value prior to the IPO. Another factor, which makes the news of Twitter's IPO even more palatable is the fact that last April Twitter commenced an aggressive plan to form distinct revenue streams through their ad revenue program. After seeing Facebook's initial market performance over the course of the last twelve months (prior to their recent ascent) Twitter obviously learned from the pitfalls of Facebook's IPO and has decided to fill in the gaps, through which Facebook failed to do prior to going public.
Twitter estimates their company to have a market capitalization anywhere between 12-15 billion, which contrasts greatly from Facebook's IPO which had institutional investors push an oversubscribed offering into a 100billion dollar market cap prior to the IPO. Another factor to consider in the Twitter IPO will be the future potential revenue streams that are to come. Twitter offers a host of potential revenue streams that vary from content sharing, messagers, followers and consumers, as well as joiners. Every one of these have the opportunity to open up the door to a wide variety of potential revenue sources whether it be through sponsorship dealings and or advertisements the mobile application is set to generate 1 billion in ad revenue come 2014. That being said, many expect Twitter's true potential to be derived from yet-undeveloped verticals, as is the case with Facebook's (NASDAQ:FB) on going attempt to develop ad revenue.
Estimates predict that Twitter's current revenue is around 582 million dollars for this year and just last week they acquired a mobile ad exchange company called MoPub for an estimated $350 million in stock. This recent acquisition further emphasizes Twitter's advertising ambitions in the period ahead. In reviewing LinkedIn and Facebook's stocks both have done exceedingly well and their performances will most likely help push Twitter upwards upon its IPO. Taking that into account, Twitter will most likely become the next overhyped IPO of 2013/2014 and if one can get in prior to and or directly after their IPO, the short-term reward could be extremely worthwhile, however the common investor should be cautious not to get lured into acquiring this position at a high premium.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.