The Twitter IPO is going to dominate the minds of certain investors until the company actually lands on the public market. Some of the investors interested in the company have surely been burned by some of the tech world’s more recent IPO failures and successes. There are two major extremes to consider, Zynga Inc (NASDAQ:ZNGA), which spiked and then crashed, and Facebook Inc (NASDAQ:FB), which crashed and then spiked.
Speaking on Bloomberg TV today, Contributing Editor Nick Thompson took a look at the Twitter IPO and decided that the company would likely land between those two extremes. The valuation war will rage on between the analysts until a market decides a fair price for the company, and, given recent tech IPO performance, mis-pricing is likely to hit the Twitter IPO.
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Twitter IPO outlook
The Twitter IPO filing was deemed boring by some, but that might be a good thing. The company does not want to hype its future business up only to see investors run from the company as they did from Facebook Inc (NASDAQ:FB) in the weeks following its IPO. The same thing happened to Zynga Inc (NASDAQ:ZNGA), although that company’s grace period lasted a good deal longer.
Facebook Inc (NASDAQ:FB) performance will likely have the greatest effect on the Twitter IPO. The company was mispriced at the original offering and investors are going to try to avoid that mistake. Facebook’s excellent performance this year will also factor in, and allow the company some grace from investors to give it the time to make money.
Twitter IPO risks
Twitter is a growing company and it’s difficult to predict how successful it will be. The firm’s business is untested and the Internet market is young. Google is tough enough to have a drastic effect on any other company trying to take to Internet advertising.
The number one problem is that investors don’t seem able to price technology companies because of how quickly the market moves and the dearth of historical examples. Facebook Inc (NASDAQ:FB) and Zynga Inc (NASDAQ:ZNGA) were both mispriced by market pressure in the wake of their IPO’s.
Twitter might face the same problem, but with those experiences behind them, investors they are likely to be more cautious this time around. Twitter shares are, like Thompson told Bloomberg TV today, likely to fall somewhere in between those extremes.