After months of speculation,
has indeed filed its IPO papers.
Because so many people use it, the Twitter IPO is likely to be
the most anticipated initial public offering since
debuted in May 2012. The question is: Just how big will Twitter's
It won't be as large as Facebook's. That we know. Facebook
went public with a valuation of $100 billion. Twitter is valued
at an estimated $9 billion, according to private sales of the
stock to investment group
earlier this year.
But Facebook wasn't worth anywhere near $104 billion at the
time of its IPO. Its trailing 12-month earnings were only $1
billion, so the stock opened at a ridiculous 104 times earnings.
Unprecedented hype and build-up pumped the IPO price up to a
number it couldn't sustain.
We know what happened next. Facebook shares immediately
plummeted, sinking from a $38 IPO price to less than $18 a share
within four months. It took more than a year for the stock to
Can Twitter avoid a similar fate? The hype machine is already
churning. Given that fervor, it will be tempting for the company
to price its IPO much higher than it's actually worth.
Based on 2013 revenue, Twitter is worth about 11% of what
Facebook was at the time of its IPO. Facebook's 2012 revenue was
$5.1 billion. Twitter's estimated 2013 revenue is $582
Sales are growing exponentially, however. Twitter's
advertising revenue is expected to more than double this year,
from $288 million in 2012. It's supposed to rise to $950 million
next year, and then $1.33 billion in 2015.
Rising revenues don't translate to profitability, however. How
profitable Twitter is will go a long way toward determining how
the stock performs once it goes public.