Tuesday, December 3, 2013
Twitter halo fades after listing; Facebook, LinkedIn hold ground
After a big-bang listing, Twitter shares seem to be losing its fizz while social media rivals Facebook and LinkedIn are holding the fort amid portfolio churn by investors the Hindu reports.
In a dream debut, microblogging site Twitter’s stock popped up on NYSE debut on November 7, and closed with 73 per cent gain for investors who subscribed to its initial public offering price of $26 apiece.
The firm, which lets people post 140-character messages, raised $1.8 billion in a keenly watched IPO.
Skeptics were left speechless as the valuation of the firm, which is yet to make profit after 7 years of existence, soared to over $25 billion even as tech firms like Facebook and LinkedIn ended 2-4 per cent lower that day.
However, the momentum in Twitter shares seem to be falling already and analysts have begun to question the company’s current valuations vis-a-vis Facebook and LinkedIn, arguing on better margins and larger size for the two.
After closing at $44.90 on November 7, Twitter share price has failed to reach new highs and has entered December with a last traded price of $41.57 apiece — an over seven per cent drop from first day closing.
Along with a knock on share price, volumes have sharply dried up too. From 117 million shares traded on debut day, daily number of shares traded stand at about 6 million at present.
In contrast, the overall U.S. markets have inched up during this period as economic recovery picked up pace. Besides, Facebook and LinkedIn stocks have also begun to warm up.
Mark Zuckerberg-led social networking giant’s shares haven’t moved up from $47 levels on the day of Twitter’s fantastic debut but investors have not lost money in Facebook.
In fact, Facebook IPO investors are sitting on good profits since its listing in May, 2012 at around $38 levels.
“A multiple (of Twitter) that far above its peer group of 17.4 times leaves little to the imagination; there seems to us no upside (to price) scenario not already more than included in Twitter’s implied growth outlook...,” research firm Hudson Square said in a note to clients.
Professional online networking portal LinkedIn has already landed gains for investors if they bought its shares instead of Twitter on Day 1 of microblogging site’s listing.
From $211 apiece, LinkedIn now trades six per cent higher at $224.
It’s been a dream run for LinkedIn IPO investors after the issue hit markets in 2011. From $45 levels, the stock has more than quadrupled in less than 4 years.
Experts feel in the medium term, business-wise Facebook and LinkedIn are better-placed than Twitter.
“We expect Twitter’s average annual revenue per user to amount to $2.8 in 2013, which stands significantly below our expectation for Facebook and LinkedIn. While the figure for Facebook is expected to hit $6.5, the same for LinkedIn will reach $8.3. It is evident that Twitter has a long way to go in terms of monetising its platform,” analyst firm Trefis said in a report this month.