With social networking becoming a huge part of daily life, almost everybody in the world is now familiar with the popular social media site called Twitter. With over 500 million users, Twitter boasts one of the largest user bases of any other social network, with only Facebook that has a more users. As some may know who invest, Twitter is going public, and it has been rumored that its IPO (Initial Public Offering) will be on November 15th.
Twitter up until this point has seen enormous growth since its beginning, the number one factor as to why I think that this will be the stock to watch when it is finally publicly traded. The company has grown from zero dollars coming in when they started to racking in $500 million a year, roughly a dollar per user. There is only one problem with this: that $500 million isn't profit. In fact, the company is losing money despite its rapidly growing user base. This is the one problem I really see in the transition to public, because believe it or not, investors like to make money. To give Twitter a hand, they really have stepped up their adds around the site, putting a few subtle "promoted" tweets on your feed everyday. The hard thing for profitability is that Twitter might have to risk inconvenience, like a pop-up when the site opens, to really make money, something that has the potential to avert users. Obviously, profitability in a company is not a quick fix, and it will be very interesting to see how Twitter fares going public and what they will do to change their business model if that doesn't go too well or them.
One thing Twitter does have going for their stock price is their huge amount of users. This is sure to attract investors who hope to have some influence in a company that has a ton of people. Once investors get an in by buying shares the more influential ones (who now own a part of the company) have a say in investor's conferences and such to give a profit to Twitter. Just the sale of the stocks themselves will also bring in capital to Twitter. Unfortunately, at the cost of this help from investors Twitter's stock will likely lose some money initially until they can get heir profits turned around, and the might go up before that, as a company doesn't necessarily need to be profitable to increase their stock price.
Overall it will be interesting to see what happens to Twitter as it is publicly traded. In my opinion, this could be one of the smartest moves for the company. Although they give up some of the autonomy of a private company, they have the potential to make a lot more money if everything goes right for them. In the end, only time will tell, and my prediction will either be right or wrong in just a couple of months, lets hope for my ego's sake that I'm right.