Twitter is probably the biggest social network out there that has so far failed to go public. Speculation abounds about when the company might deign to offer its equity to the public, but the firm’s executives have so far failed to offer any clues. A Bloomberg report today, citing one of the company’s founders, suggests that an IPO may yet be very, very far down the road.
Jack Dorsey, who helped found the company back in 2006, said that the firm is “not even thinking about it” at the moment, referencing the possibility of an IPO. In a market still tainted by some very poor social networking IPOs in 2012, the company may be making the right decision in order to achieve fair value.
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Back in February, details of a private sale of shares by some of the company’s investors put the firm’s estimated valuation at just under $10 billion. The shares were sold in the first month of 2013, and involved the purchase of $80 million of the company by BlackRock Inc. (NYSE:BLK). In 2014, Twitter ad revenue is expected to hit $1 billion.
Twitter might be waiting for two things to happen before it tries to go public. The first is to remove its public offering in time from the disastrous offering of Facebook Inc (NASDAQ:FB). The world’s largest social network went public last May at a price of $38 per share. On today’s market, shares were trading at just over $27, a loss of 28% of their value in a good equities market.
There were even more disastrous offerings by web based firms in recent years. Groupon Inc (NASDAQ:GRPN) went public in late 2011, and has lost three quarters of its value since then, Zynga Inc (NASDAQ:ZNGA) has lost 65% of its value since its offering around the same time. Twitter doesn’t want to go public only to see most of its value erased in the twelve months afterward.
The company is probably waiting until it manages to secure a monetization model before it risks taking itself public. In these terms, one of the models to follow may be LinkedIn Corp (NASDAQ:LNKD). The firm’s stock has risen by more than 100 percent since it went public in 2011, though its valuation is incredibly high. Investors can afford extra confidence in a company that they know has expandable revenue streams.
Twitter doesn’t have that just yet, but it might before it goes public, and that might help it avoid the pitfalls that trapped rivals.