Post date: Nov 05, 2013 11:3:17 PM
BVO - Popularity is a good thing, but in the case of Twitter's IPO it's starting to make some people very nervous.
Sources tell Reuters Twitter's IPO is now massively oversubscribed.
Twitter's so called road show, where management speaks with potential investors, went so well they wrapped up early after boosting the expected price range to between $23 and $25 a share.
But sources close to the situation said demand among institutional investors has been so strong, the final pricing could be even higher than that new range.
That makes S&P Capital IQ analyst Scott Kessler leery:
SCOTT KESSLER, EQUITY ANALYST, S&P CAPITAL IQ:
"It seems like a lot of people are really kind of focused on this notion of Twitter being a global business, a global brand with a lot of growth potential and we agree with that notion. But to be valued at upwards of $20 billion potentially, without any profits at this point or we think through next year. We think that you know their kind of, margin of safety, is a lot more narrow than for other companies that have been around for a while."
But there might not be all that much price resistance. During the road show, investors haven't focused much on the pricing, instead raising concerns about their advertising strategy, and their international growth plans.
While it's not profitable, Twitter is gaining traction in social media marketing. Its revenue per visit (RPV) jumped 300 percent year over year according to the Adobe Digital Index. That beats rivals like Facebook and Pinterest.
Chris Baggini, Sr. Portfolio Manager, Turner Investments
CHRIS BAGGINI, SENIOR PORTFOLIO MANAGER, TURNER INVESTMENTS:
"You are buying an investment that is right now very heavily used, very dramatically under monetized and really has a company team that is really focused on driving revenue growth over the coming years and that is where the excitement lies."
And then there are the comparisons to Facebook and its IPO debacle.
Bruno Del Ama, CEO, Global X Funds:
BRUNO DEL AMA, CEO, GLOBAL X FUNDS:
"We certainly don't expect some of the trading issues that happened with Facebook when they listed on Nasdaq they are obviously very cognizant of some of the issues that they faced. They changed the listing venue to the NYSE. They tested the system a couple of weeks ago and we are definitely going to see a lot of volume. Just a lot of interest in this name at this time."
Twitter will trade on the New York Stock Exchange under the ticker TWTR.