In case you haven't heard the whisper Twitter is widely expected to file for an Initial Public Offering (IPO) late 2013 or early 2014. But will they keep it a secret? Wait, how can they keep it a secret if the whole world already knows?
The Jumpstart Our Business Startups Acts (JOB) got passed into US law last year and it allows companies with less than $1 billion in annual revenue to keep their IPO filings all hush and hush and confidential.
But, it really makes no difference whether Twitter goes public with the news or tries to file in secret; everyone already knows that they are going to do it. So who let the cat out of the bag?
Letting it slip that the well-known social network company is going to become an IPO a year out, clearly brings to mind a well-known distraction technique designed to drum up support for speculation purposes. What game are the people at Twitter playing?
Then again, you can't keep it a secret, especially if Digg.com or FinancialTimes.com has the story a year out. But if the intent of Twitter is to keep the actual timing of their IPO a secret in order to "minimize the speculation" experienced by the failed Facebook IPO during its opening day then that could make sense.
Does the "Secret Twitter IPO" Smell Bad?
By simply announcing their plan to become IPO a year out, Twitter appears to be flying right in the face of "minimizing speculation." Which begs the question… Why do it at all? And the answer..?
It's a distraction from the real problem; "minimizing speculation" is not and has never been the problem.
The real problem is that Twitter does not having a tangible product. And so it makes little difference whether or not the IPO is a secret, because it simply doesn't matter. The supposed Secret" actually fuels speculation, and it doesn't fill the "need of certainty" within the market place, which is present because there is no talk of a tangible product.
Bottom line--speculation, clutter and uncertainty aside… what product is Twitter selling?
How are they making money? Or, more importantly, how will their future shareholders make money? What product do they have that will help them increase their profits to ensure future growth? What's the" tangible thing of certainty" Twitter will sell instead? At the moment it's just commercials, consumer information and partnership with affiliates.
Of course, commercials, consumer information and partnership all make a ton of money for the Twitter Company right now… but again what about in the future?
Potential earnings were the "invisible problem" facing Facebook during their days of the initial public offer. But, unlike Facebook, Google had an out, and it was their mobile phone product "Android". This product served as a tangible good that the shareholders could cling to with a fare amount of market certainty, making it easy to buy the stock without the ambiguity or speculation.
Certainty sells! And fact-based fundamentals and sound principles fuel "market certainty." It's like a warm blanket when deciding to buy or sell stock.
So, what's the answer?
The experts are pricing the Twitter IPO at 30 times revenue or $15 billion compared to Facebook's opening at $16 billion. And their products are ads, promoted tweets, target tweeds and partnership with photo-sharing site Pinterest. With 200 million users worldwide, the IPO will generate a ton of money for the company but it might not solve their long-term problem of producing a product. Advertisement is a great source of income, but all it takes is a bad headline or two and can end up like Tiger Woods clinging to his golf clubs as his only form of income.
Should You Invest in Twitter Stock?
Understand as an IPO, on paper, Twitter will not have the key fact-based stock fundamentals, yet, because they aren't publicly traded. So, speculation, clutter and uncertainty are the key to drumming up support and this especially true if the company is celebrated.
There is a lot of expectation and hope for a Twitter IPO to do well on its opening day, like Facebook, however, investors should keep in-mind of the risk and uncertainty that comes with an IPO, because it is just that …. SPECULATION.
So, the real bottom line is: We will see. Time will tell...and buy low and sell high.
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