After a successful listing, Twitter shares seem to be losing its sparkle while social media rivals Facebook and LinkedIn are holding the fort amid portfolio churn by investors.
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 USD 26 apiece.
The firm, which lets people post 140-character messages, raised USD 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 USD 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 USD 44.90 on November 7, Twitter share price has failed to reach new highs and has entered December with a last traded price of USD 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 US 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 USD 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 USD 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 USD 211 apiece, LinkedIn now trades six per cent higher at USD 224. It’s been a dream run for LinkedIn IPO investors after the issue hit markets in 2011.
From USD 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 USD 2.8 in 2013, which stands significantly below our expectation for Facebook and LinkedIn.
While the figure for Facebook is expected to hit USD 6.5, the same for LinkedIn will reach USD 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.