Twitter IPO – Profitable?

IPO stands for Initial Public Offering. This occurs when a privately owned company decides to offer its stock for the first time in a public market. To raise money, the company in effect sells parts of the company to investors. In so doing the company becomes a public company. IPOs are used by a company to raise investments. Twitter IPO refers to Twitter’s first appearance on the stock market as a public company. The question is whether buying into Twitter IPO is profitable or not.

Twitter IPO in a Nutshell

Twitter IPO will attract attention from all over the world. However, the longevity of the company must be considered when we ask the question – Is Twitter IPO profitable? Certainly, Twitter is popular today. However, we must pay attention to what some may describe as the company’s ‘philosophical’ attitude towards its future. It lists the risks facing Twitter as a potential dwindling of interest from current users or that the company will no longer be so appealing to future users.

In particular, those considering Twitter IPO must bear in mind that the company expects growth to slow. Although there has been an increase of 44% in the number of users between 30 June 2012 and 30 June 2013, Twitter has stated that it believes its growth rate will slow in time as the user base expands. These facts must be reflected on when you decide whether to buy into Twitter IPO.

Recent Performance

Are you still wondering if Twitter IPO is profitable? Bear in mind that whilst revenue has soared, the company is not as of yet making a profit. In 2010 the company’s revenue was $28.3 million, whilst by 30 June 2013 it had made $253.6 million in the first half of the year alone. However, each year has seen the company’s expenses and costs rise, the sum of which came to $394 in 2012.Twitter also states it will face ‘significant demands’ on its infrastructure due to a quick growth in headcount. Employee numbers alone have risen by more than 1,800 between 1 January 2010 and 30 June 2013. It is essential to think about these matters carefully before committing to Twitter IPO.

Advertising Crucial

Anyone considering Twitter IPO must realise that sufficient advertising revenue is key to the company’s future growth. The majority of revenue comes from advertising, so Twitter needs to be able to convince advertisers to use Twitter. The challenge regarding this task are that advertising space is bought through third parties, contracts are not usually long term and how Twitter can convince advertisers that using Twitter adds value to their campaign. Whether Twitter will be able to continue to gain sufficient revenue from advertising is another factor in the matter of Twitter IPO.

There are clearly many factors to consider when we talk about Twitter IPO. Ultimately, the profitability of Twitter IPO remains to be seen. In the mean time all we can do is endeavour to weigh up all the facts and statistics carefully when we ask whether Twitter IPO is profitable or not.

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