Much of the narrative around the coming Twitter Inc (NYSE:TWTR) IPO has concentrated on the company’s attempts to avoid repeating the disaster that was the first offering of Facebook Inc (NASDAQ:FB) shares. The company has been delivering more restrained filing documents, it’s been talking less on CNBC, and it’s decided to avoid the companies that handled the Facebook offering.

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There is still one major problem with the Twitter IPO that makes it more dangerous than the Facebook Inc (NASDAQ:FB) IPO to investors: Twitter did not make a profit last year. Facebook may have gone public at an almost unbelievable IPO, but Twitter’s P/E is not applicable. The company’s IPO is coming, and investors should be careful.

Twitter IPO narrative

The broad narrative heading into the Facebook Inc (NASDAQ:FB) IPO was inevitability. The company had more than 1 billion users, and it was still growing. It had already made a profit the year before, and was expanding its advertising when it went public. Facebook has managed to live up to that promise in the year since, but it was not inevitable.

The broad narrative heading into the Twitter IPO is that the company will not be overvalued like Facebook Inc (NASDAQ:FB). It will not make the same mistakes that the world’s biggest social network made last year. The narrative is designed to reassure investors that they won’t get burned again, but looking at the firm’s fundamentals it’s difficult to see how Twitter is a better deal than Facebook.

Twitter Inc (NYSE:TWTR) does not make a profit. The company plans to earn money in a competitive advertising industry in which it has a substantial technology disadvantage. The company has a huge amount of potential, but social media has only been a buzzword for five years or so. Nobody is sure where the market is going, or how long it will stick around.

Twitter and safety

Selling the Twitter IPO as much safer and more conservative than the Facebook IPO is misleading. Twitter will go public at an extremely high valuation. It will take the money the IPO affords it and it will use it to develop the kinds of technology it needs to compete with Google Inc (NASDAQ:GOOG). Investors should be nervous about the prospects of any company planning on going up against the Mountain View company.

The Twitter IPO is not safe. It is not conservative. It is not better than the deal Facebook offered. It is likely that the company’s IPO will have less problems than the Facebook Inc (NASDAQ:FB) deal did. The New York Stock Exchange will guard against the technical problems the Nasdaq faced. The valuation problems that Facebook Inc (NASDAQ:FB) faced are the same at Twitter.

Twitter valuation

Any initial public offering is planned for a time when valuation is good for the company offering its shares. The Federal Reserve is continuing to pump cash into the stock market, and Facebook Inc (NASDAQ:FB) earnings have picked up. That leaves the coming months a great time for Twitter to go public.

That does not mean it’s a good time to buy Twitter shares. In many cases, as with Facebook Inc (NASDAQ:FB), an IPO is a bad time to buy shares. Twitter may be valued at less than some analysts expected or less than some think the market will bear, but that doesn’t mean shares are undervalued.

By any fundamental metric Twitter Inc (NYSE:TWTR) is overvalued. The stock market as a whole has been inflated by quantitative Easing. Twitter is getting a double whammy from QE and the “cool factor.” Twitter is not more fairly valued than Facebook Inc (NASDAQ:FB), and it’s not a safer bet.