- David Faber reports hearing Twitter's (TWTR) IPO is 30x oversubscribed. Major hedge funds requesting millions of shares (i.e. looking for a chance to make a very easy killing) are said to have received only 5K and 10K-share allocations.
- Many already expect a big pop when shares begin trading today, given intense media hype and Twitter's relatively conservative approach to pricing its offering (out of fear of seeing a repeat of Facebook's IPO).
- Henry Blodget has given Twitter a valuation of $30, 35% above its $26 IPO price and equal to 10x estimated 2015 revenue of $2B.
- Blodget's reasoning: Facebook and LinkedIn respectively trade at 9x and 11x 2015E revenue; Twitter (like its social media peers) doesn't have any content costs; and the company should be able to reach a 50% EBITDA margin (above its 30% target) in time, if not Facebook's 50% op. margin.
- At the same time, Blodget cautions Twitter's U.S. penetration is relatively low, that its future growth depends heavily on better monetizing foreign markets where its ARPUs are low, and that the scale of its ad success stories have been small.
- Unlike Twitter, Facebook and LinkedIn have already turned profitable. But their top-line growth is now lower.
- Q3 results/user data, More on Twitter