A report by Greencrest Capital—an outfit that studies soon-to-IPO businesses and produced some of the better analysis on that forementioned group of tech stocks—suggests Twitter’s preparations for its public début may begin this year, an offering could come in 2014 and the whole shebang might be worth more than previous estimates.
Recent floats by social media have disappointed except for LinkedIn (up 19%)
Since the Facebook float last year, valuations on Twitter have increased from about $8 billion to in excessive of $11 billion. Rumours of Twitter following Facebook in a new float have been around for some time now. Such rapid valuation changes suggest a promotional stance for a Twitter float.
IPOs falter when markets are bearish. As day follows night however, once sentiment improves investors are much more likely to be willing to fund capital for new enterprises. It is likely that we will see more enterprises presenting on the IPO calendar this year.
It is well to have a check-list of criteria to be met before accepting an offer for shares in a new float.
- Floats of existing private companies that scarcely need more capital, but will greatly reward existing directors, are more likely to falter.
- Is the float in a sector in favour with investors?
- Is it a new enterprise with little or no positive cash flow in the foreseeable future?
- What is the likelihood that the new venture will ultimately succeed?
- How competent and motivated is the management?
Make sure that you devote adequate time to study the float prospectus.
- Twitter could be worth $11bn as it prepares to go public in 2014 (guardian.co.uk)
Categories: Trading opinion