Twitter to go the IPO way in 2014 but will it be too late by then?

According to trade analysts twitter which is now worth $11 billion will make its debut in the trade market next year. It was previously valued at $8 billion at its last financing round in 2011 but the growth in valuation dipped to $9 billion after the disappointing floatation’s of Facebook and Zynga which dampened confidence in the technology business.

It's time for Twitter to go the IPO way in 2014?
It’s time for Twitter to go the IPO way in 2014?

The social media company was said to have shelved its plans to go public awhile back but as the Telegraph reports, the company has started preparing its management team for the most anticipated IPO by the end of this year. The company has started shuffling its management by promoting CEO Ali Rowghani to COO and hiring Zynga financial chief Mike Gupta in his place. The site is worth $11 billion based on the trading of unofficial shares in the secondary markets and the user base of the site has grown rapidly over a few years but the company has failed to translate that into profits.

The company has become more aggressive in its efforts in the past year and according to co-founder Jack Dorsey who told CNBC late last year that the company would go public when it is “ready for that milestone” rather than as a exit strategy or a goal in itself. The prospects for Twitter are strong in 2013 as speculation is ripe about Apple being interested in buying the popular micro-blogging site. According to Greencrest analyst Max Wolff, “Using the secondary market for shares to mark enterprise value is a very difficult and opaque process; it is a rumor rich and special share class soup. That said, Twitter is up since the Facebook IPO and is now valued at northward of $11bn. This makes sense as growth in users and new monetization efforts are both yielding fruit and pointing toward a good 2013 for Twitter.”

However Twitter has a big task ahead if it does float in the stock market that is to convince its investors of its ability to generate sufficient revenue in the future after the pessimism surrounding Facebook and social games maker Zynga. Also companies that offer an IPO are typically young companies or which have been around for years and have entered the public domain to generate market capital. According to Abram Brown, Forbes writer, Twitter is becoming good at making money. It has a strong connection with Pinterest and targets tweets to those users who are much likely to click the links attached to the promoted tweet and photo sharing has been improved to compete with Instagram. But in recent times IPOs have lost their popularity and the recent examples of Facebook, Zynga and Groupon are there to take heed. In 2011, Zynga lost three quarters of its value after the company went public.

Groupon’s price has dropped 81 percent since going public. The company was at $20 per share opening day. In spite of all the money investors raked in, Facebook has lost 26 percent of its value since the company hit the public market last may. Greencrest analyst Max Wolff said that although Twitter’s $11 billion cannot even stand strong next to Facebook’s $100 billion value, Twitter’s worth today looks better than Facebook did on its IPO price. Twitter’s value is stronger today but will it be the same in 2014 when the company goes public? This remains to be seen and all we can do is just sit back, wait and watch if this will be true or not!