Investors sceptical of Twitter stock: Poll
04 Nov 2013
Twitter's forthcoming IPO has run into scepticism from potential investors and the broader public as it is about to launch its initial public offering this week, according to an Associated Press-CNBC poll released today.
According to 36 per cent of Americans acquiring stock of the 7-year-old short messaging service would be a good investment, while 47 per cent disagree.
Last May, ahead of Facebook's IPO, 51 per cent of Americans considered Facebook to be a good investment, with only 31 per cent saying they did not agree.
Surprisingly, 52 per cent of people aged 18 to 34 said Twitter's stock investment was not a good idea.
Twitter Inc is set to begin trading on the New York Stock Exchange on Thursday morning with the price for its IPO to be decided sometime Wednesday evening.
The San Francisco-based company is targeting around $1.6 billion. The transaction values Twitter at as much as $12.5 billion, a little more than one-eighth of Facebook's roughly $104 billion market value at the time of its public offering.
Twitter has never delivered a profit since its launch, though the micro-blogging site's future depends on advertisements as a primary source of income.
The company mainly offered three types of ads - promoted tweets, promoted accounts and promoted trends.
Meanwhile, around four years after Twitter touting the importance of opening its doors for programmers to build businesses to complement its short-messaging site, start ups are finding themselves unwelcome and excluded, with the company restricting outside applications in a bid to to tighten control of advertising sales on the site.
As the company prepares to launch the biggest US technology initial public offering since Facebook, it would instead need to look to its own talent for a continuous stream of innovative products, contributing to surging expenses.
Meanwhile with its business ready to take off as brands seek to reach its 230 million users, Twitter has to spend faster than its revenue growth to keep up.
Bloomberg News quoted venture capitalist Nihal Mehta co-founder of LocalResponse Inc, an online-ad company in New York that bought Twitter data as saying, Twitter would probably never let a business become huge on its platform.
Twitter had ploughed $87.3 million – more than half its revenue – into research and development in the third quarter, mostly related to hiring. R&D costs shot 170 per cent from a year earlier, while sales surged 105 per cent.
Attracting outside developers was one way Facebook, Google and Apple kept R&D costs down with Facebook spending 19 per cent of sales on R&D in the latest quarter and 14 per cent in the last period ahead of its May 2012 IPO.
Google spends about 14 per cent as against Apple which spent 3.3 per cent of their sales on outside developers.
