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Re: TWTR

#281

Post by encoderer »

YZF wrote: post #280
encoderer wrote: post #274

Earlier quoted context omitted.

Market Dynamics. The "insider" doesn't have to compete with as many people for an ownership share. A small sampling of "insiders" does not efficiently price a security the way an offering to the greater market does. This idea that capital markets are designed to screw over the little guy is amusing to me to see HERE on THIS WEBSITE of all places. You act like the market works like Amazon.com where these scary "inside…

I'm not sure what your expectations are of this web site but as far as I can tell we're a bunch of people with different opinions. :-) To me an IPO is very much a conflict of interest situation with asymmetry of information. There are laws to govern this but there is a huge gray area. Once a company is public it's a little different... In my opinion capital markets have been getting more broken in many ways and have…

It's not your specific opinion here that amuses me, but that there is certainly an anti-twitter-ipo vibe here. Across several stories. I've been a regular here for 5 years or so and I've seen many IPOs come and go and few have been treated with this level of derision.

You're obviously entitled to your own opinion, and certainly IPOs carry much risk. That "insiders" get made liquid is not, IMO, one of them. Somebody who invested in GOOG on day one would've made over 10x on their money today. Somebody who did the same in ZNGA would not. It's obviously very risky, with potential for commensurate reward.

I'm not sure why you think the markets have "failed to deliver the economic growth" over the last 15 years, or that it's somehow their job to "deliver" economic growth. I think us "little guys" who have invested in the market in that time have done very well on balance.

I'm not one for long back and forths, so feel free to have the last word if you'd like it. I replied initially because I'm very much turned-off by the save-people-from-themselves philosophy.

You quoted Buffet, I'll quote Jesse Livermore: "t was never my thinking that made the big money for me, it always was sitting."

If you think the "little guy" is screwed over by the "big guy", become a buy-and-hold investor. There's little way to be screwed there. Spread your bets out--diversify--and buy and hold. When it comes to trying to time the market or play ER or day trade, you're right, it's hard for a retail investor to make a buck. So buy and hold and let the stock market help you accumulate wealth the way it's done reliably for over a hundred years.

Re: TWTR

#282

Post by Aloisius »

nine_k wrote: post #168
tobyjsullivan wrote: post #147

Earlier quoted context omitted.

When you say "Joe Public" you make it sound like the stock is being bought with our tax dollars. Anybody who buys TWTR is making an informed decision and expects Twitter to do very well. It's hard to imagine Twitter today eventually being worth the current market cap of $25B. However, take a look at Google as a prime example of success. When GOOG first hit the market in 2004 it got a market cap of $23B. It was somewh…

Regarding tax dollars: please take a moment and google for "QE3 stimulus package". If not tax dollars, it's inflation dollars, which is an indirect tax anyway.

Asset price inflation is not consumer price inflation. The average person is not seeing any significant level of consumer price inflation.

Re: TWTR

#283

Post by encoderer »

robterrell wrote: post #253
mathattack wrote: post #243

Earlier quoted context omitted.

One comment... Google and Facebook each tried to stick it to the bankers in their own ways. In the end both struggled as a result. Google tried to cut out bankers and make them play by special "Just for the Google IPO" rules and rates. By creating a custom-IPO process, they saved on banker fees but wound up leaving an awful lot of money on the table. Facebook went the other way. They tried to grab every last penny on…

Help me understand why Facebook taking every dollar out of the market was a bad thing for them. I understand why Wall Street wasn't happy about it (since they expected a pop they could profit from & had to buy stock to fulfill their obligations... and why should taking a company public be an entirely risk-free profit opportunity anyway?) But, why was it bad for Facebook? Sure, their stock was below the IPO value for…

Not "certainly." We had an IPO where I work in 2012. People hired very recently before the IPO had a strike price near the offering price.

Moreover, there is a mental dynamic when recruiting. A steadily appreciating stock is a helluva recruiting tool.

Re: TWTR

#284

Post by nerfhammer »

joslin01 wrote: post #261
nerfhammer wrote: post #237

Earlier quoted context omitted.

QE myths: http://business.time.com/2013/09/18/taper-tantrums-3-myths-a...

Alright, since you can't speak for yourself or rebuttal with anything more meaningful than "This is nonsense.", I'll respond to the article. 1.) Quantitative Easing is printing money -- "This is because when the Fed buys bonds from banks it does so by crediting those banks’ accounts at the Fed with reserves that didn’t exist before. But it’s misleading to call this process “money printing” because it doesn’t actually…

To say that all recent stock price increases, much less the one-day price of twitter's stock specifically, are caused by QE alone is an extreme claim and it is not my burden to disprove it.

The simpler and more plausible explanation for stock market growth is coinciding GDP and earnings growth. QE should lead to a mild preference against (UST) bonds by lowering yields, but it is dubious that this alone could explain stock market indexes doubling over the same period. Twitter's one-day stock price specifically is idiosyncratic investor behavior and blaming that on QE is absurd nonsense.

Re: TWTR

#285

Post by nl »

silverbax88 wrote: post #247
olefoo wrote: post #183

Earlier quoted context omitted.

Yes. Think about all of the paywalled news outlets out there. Think about how many journalists tweet their stories to drive their personal brand. Think about immensely popular twitter accounts and sought after domain experts. Think about the fact that someone who is very entertaining on twitter needs to leave twitter to ( consult, sell t-shirts, produce media, etc. ) if they want to make money. Think about how t.co m…

I don't want to sound dismissive, but this is very similar to the 'eyeballs' strategies that were bandied about prior to 2000. If a million people use a link to go to a paywall site, that's awesome - except as of now the data shows that Twitter users don't become buyers as a general rule. Can they make money? Sure. Can they make money with ads? Sure. Can they make money with massive vertical media funnels? Well...wha…

Can they make money? Sure. Can they make money with ads? Sure. Can they make money with massive vertical media funnels? Well...what will make them more successful than Apple, Google, Microsoft and TimeWarner who have all been trying to do the same exact thing for many years?

Err.. I'm not sure about Apple or TimeWarner, but Google and Microsoft have been very successful at making display advertising work well.

Check out the IAB 2013 Half Yearly report[1]. Some key quotes:

Display-related advertising accounted for $3.1 billion or 30% of total revenues during Q2 2013, up 8% from the $2.9 billion (33% of total) reported in Q2 2012. Q2 2013 Display-related advertising includes Display/Banner Ads (19% of revenues, or $1.9 billion), Rich Media (3% or $329 million), Digital Video (7% or $676 million), and Sponsorship (2% or $181 million).

Note that they aren't counting mobile advertising as display advertising (even though much of it effectively is).

Mobile revenues continued to quickly gain share, representing 15% of total revenues in HY 2013, as compared with 9% reported in FY 2012 and 5% in FY 2011. First half 2013 Mobile revenues represent 90% of total 2012 Mobile revenues.

Note that Twitter has particularly strong mobile usage.

Many people don't realize that people still pay a lot for "eyeballs":

At 65% of advertising revenues through half-year 2013, performance-based pricing appears to have leveled off, even experiencing a slight decline from its high of 66% for the full year 2012. As a result, CPM/impression-based pricing gained slightly, up to 33% for the half-year, its highest point since 2010.

[1] http://www.iab.net/media/file/IABInternetAdvertisingRevenueR...

Re: TWTR

#287

Post by nl »

corford wrote: post #143
nonchalance wrote: post #113

Earlier quoted context omitted.

The simple answer is that a share price is the present price to pay for the future cash flows of the company. Just because they aren't making money now doesn't mean that will always be the case. If twitter starts making billions of dollars soon, and starts paying that out to investors, then everyone makes money. They "eventually foot the bill" if twitter doesn't make money. Your cynicism reflects the fact that many c…

I find it hard to accept that a rational person thinks twitter will ever have the profit earning capability of Google. It just seems nuts to me to justify twitter's future earnings potential on a black swan event. Speculation on the other hand I can sort of understand and accept (although it's kind of sad that the speculation is driven entirely by hype rather than any kind of solid metrics).

I find it hard to accept that a rational person thinks twitter will ever have the profit earning capability of Google. It just seems nuts to me to justify twitter's future earnings potential on a black swan event.

I don't think anyone has claimed Twitter is going to be as efficient as Google at making money. But TV stations make a lot of money, and Twitter has a closer relationship to its users than a TV station. Twitter also has more users than most TV networks have viewers.

It's hardly a black swan to follow a model that has been proven to work over 50 years (ie, advertising around entertainment).

speculation is driven entirely by hype rather than any kind of solid metrics

Why do you say that? There are very solid metrics on Twitter's user base, and very solid metrics around what an average user is worth to an advertiser, either on the web or on a mobile device.

Re: TWTR

#288

Post by encoderer »

nine_k wrote: post #158
clarky07 wrote: post #114

Earlier quoted context omitted.

Not really. not only did those companies not have profits, they also didn't have any revenues or users. Twitter has > 200 million users, and they are growing revenue 100% a year. Dot-com boom was a whole different animal.

Let's calculate. Twitter revenue was $391M for last 4 quarters [1]. Twitter market cap is currently $24670M, or about 63 times the revenue. If Twitter's revenue grows 100% each year (that is, twice each year), it will take 5 years for them to catch their current market cap with revenue : 1 + 2 + 4 + ... + 32 = 63. But what investors are interested in is not revenue, it's profit. Let's imagine that Twitter discovers a…

You're doing that math as-if 1x forward PE is a goal or something.

Why should the current years revenue have anything to do with market cap?

Re: TWTR

#289

Post by acchow »

this_user wrote: post #172
jrvarela56 wrote: post #118

Earlier quoted context omitted.

Apparently Twitter thought it was a good deal: http://www.cnbc.com/id/101110025 Banks' incentives are misaligned: a higher share price raises fees collected from underwriting since they get a % of total money collected in the IPO; a lower share price leads to commissions, goodwill and management fees from the private wealth/managed fund clients. Could anyone elaborate on how these concerns are/may be separated to kee…

The underwriter's goal is to facilitate a successful IPO. There are obviously different interests at play. The company and its investors would like to say as high a price as possible. The new public investors the shares are being sold to would like to see as big a profit potential as possible. The bank's job consists of choosing a sensible price point for all parties involved and advertising the offering so as to gen…

Successful for who? The existing insiders? The underwriter? The new investors? (subscribers).

The FB IPO certainly wasn't a failure in the capital raising sense. Fb raised a lot of capital than if they had IPO'd at $25 outright and the stock price had stayed there.

Re: TWTR

#290

Post by jerf »

clarky07 wrote: post #252
jerf wrote: post #228

Earlier quoted context omitted.

You seem to be using a definition of "efficient" that has some sort of moral or intuitive meaning. That's not the relevant definition. It's really something more like "the market will not exhibit large-scale persistent arbitrage opportunities", which is why showing the market is inefficient pretty much by definition requires you to produce a method to consistently make substantial quantities of money by exploiting th…

According to investopedia[1] - An investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As suc…

"Opportunities" is not "arbitrage". The value of an item going up over time is not disproof of a market's efficiency; efficiency is a point-in-time characteristic, not an across-time characteristic. A market is not required to be psychic to be efficient. It especially doesn't pertain to the case where someone generates value; Warren Buffet is not a passive purchaser of stocks, Warren Buffet seeks out stocks where he can generate value in some manner with better management.

As for your positive returns, the easiest explanation is that you're in a green square on this graph (suitably updated): http://www.nytimes.com/interactive/2011/01/02/business/20110... (Read what the graph is carefully, most people misinterpret it at first glance.)

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