There is a lot of buzz around the Twitter IPO. Twitter a company that started as a small microblogging site has developed into a giant microblogging site with millions of users and an enormous reach. Twitter has become one of the most influential websites today.
Twitter announced last Tuesday that they have obtained a $1 billion line of credit from independent American banks, these include Goldman Sachs, Morgan Stanley, JP Morgan, Bank of America, Merrill Lynch and Deutsche Bank.
Twitter has been very closely watched, especially since Facebook went public last year creating a hype around trading social media companies. Although Twitter has grown dramatically in the last couple years to a large size it may not be prepared to be public. First off Twitter is not a profitable company and has lost 2.8 million in the first six months of this year and 6.5 million in revenue.
In order to satisfy investors Twitter needs to answer some important questions
1. How fast will revenue grow and from what sources?
2. When will this turn into a profit?
3. How much can the company profits increase before reaching a plateau?
4. What investments does Twitter plan to make?
5. What is the rate of return expected on investments?
Twitter is currently losing money fast and this loss is accelerating, losses from the 3rd quarter were almost as big as the first half of year. I expect when Twitter finally does go public later this year that the stock will see a large hype before dropping and if the company does figure out how to monazite they the value will skyrocket. We saw a similar performance from Facebook earlier this year.
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