Twitter's Imminent IPO Launch - Will Investors Jump In or Run?

By Tony Rizzo November 06, 2013

A week ago, Twitter announced that it was pricing its IPO at $17 a share. This seemed low to us, enough so that we were thinking the major institutional investors would get a significant pop on their early in status while the rest of us caught up with them. Then the news arrived this week, following a number of IPO road show meetings, that Twitter was raising its IPO price to at least $25 and possibly as high as $28. Twitter must be hearing that likely large investors consider the odds for growth to be greater than the risks for revenue downsides. We always prefer to see the dollars go into the hands of the company and we're glad Twitter raised the price.

Following these pricing tweaks today, an Associated Press-CNBC poll emerged that looks to measure general investor sentiment about the whole IPO, and the results are interesting, especially in light of Twitter raising its IPO price. The AP-CNBC poll finds that investors apparently have a rather skeptical outlook on the IPO. This uncertainty extends both to whether or not investing in Twitter is a good idea, and to whether or not its prospects for long-term success are likely to be positively fulfilled.

Let's start with the most relevant numbers:

  • Only 40 percent of active investors say Twitter would be a good investment;
  • 49 percent say of active investors say Twitter would not make a good investment;
  • 36 percent of Americans in general believe buying stock in Twitter would be a good investment;
  • 47 percent of Americans in general say Twitter would not be a good investment.

Back in May 2012 AP-CNBC ran a similar poll for Facebook's IPO. That poll uncovered entirely different results, with 54 percent of active investors believing the IPO would be a good investment and 38 percent believing that it would not. This is a significant contrast and we wonder if the negative outlook is due more to what ultimately happened with the Facebook IPO than for any other immediate reason. Facebook, of course, has since redeemed itself with rather stellar performances over the last six months and two most recent earnings calls.


image via shutterstock

The same Facebook IPO poll from 2012 found that 51 percent of Americans in general said they thought Facebook would be a good investment, while 31 percent believed it would not.

Younger adults and those with a higher income make up the groups that are least likely to see the Twitter as a good investment:

  • 52 percent of people age 18-34 say that Twitter would not be a good place to invest their money;
  • 56 percent of people with yearly incomes above $75,000 say Twitter is not a good place to invest.

These are interesting numbers. We wonder how Twitter will fare once the institutional investors are bought in. Will they sell into a rising stock or will they need to sit on it? The above sentiments suggest that it may prove to be the latter scenario, though we suspect plenty of individual investors will look to get in anyway.

Social Networks - Do They Have a Future?

The following is interesting, and we would have thought that the trend would be reversed from the findings:

  • 19 percent of Americans surveyed today have a favorable impression of Twitter;
  • 27 percent of Americans viewed the Twitter positively back in May 2012;
  • 47 percent of Americans view Facebook favorably;
  • 51 percent of Americans had a positive view of the Facebook In May 2012.

We wonder if advertising plays a role in users growing negative sentiments about both Twitter and Facebook. The new survey notes that among account holders and Twitter users, more than four in 10 say they have noticed promoted content, and 31 percent who have seen it say they've actually clicked on it.

Along with the decline in favorability numbers the new poll also finds a great deal of skepticism about social media in general having a long term future. Less than half of Americans surveyed now say that none of the six social networks surveyed - including Facebook - have a high likelihood of success in five years' time. Never the less, Facebook users still believe for the most part that the company will do well for itself.

  • 35 percent surveyed say Twitter is very likely to be successful in five years;
  • 42 percent of active investors are more positive on the company's prospects and believe that Twitter will have success in five years;
  • 46 percent of Americans under age 35 say the company will be a success five years down the road;
  • 41 percent of men say Twitter will be a success in five years;
  • 54 percent of active investors state that Facebook will be successful in five years;
  • 49 percent of Americans in general agree with active investors on Facebook's likelihood of success in five years.

With these numbers out of the way our own take remains that for individual investors Twitter should only be invested in as a buy and hold stock over the next few years. We believe the company will succeed within the specific contexts of what Twitter ultimate is - a micro-blogging site.

Good luck if you are able to get in and buy.




Edited by Ryan Sartor

TechZone360 Senior Editor

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