Twitter's initial public offering (IPO) is almost upon us and you may be curious if you should purchase a part of the popular microblogging website. While trading is expected to be brisk during the first few days, individual investors would be wise to wait until the market cools down a bit before jumping in. Internet and social media IPOs have been notoriously lackluster, according to MarketWatch's financial analyst Jonathan Burton, and Twitter may be no different.
In his op-ed on the website he cited data from market research firm Birinyi Associates that showed that since 2011, over 60 percent of internet IPOs have been cheaper after three months and lose more than 11 percent of their value on average.
As for Twitter's social media peers, 70 percent traded lower after their first month, losing 7 percent according to the Birinyi analysis. The most notable losses include:
- Angie's List – 13 percent
- Facebook – 20 percent
- Groupon – 32 percent
- Pandora Media – 11 percent
- Zynga (maker of the Farmville game) – 19 percent
Last year's Facebook IPO flop has caused many investors to be wary of jumping in too early on what may just be a fad. In a MarketWatch survey of its readers, half said that they would consider buying Twitter stock, but most would wait until at least a month after the IPO. Some of those surveyed said that they were most afraid of being suddenly priced out during extreme fluctuations.
"Small investors like me do not have much of an opportunity in that situation," Patrick O'Keefe, a North Carolina country club owner, told the source. O'Keefe, however, is a Facebook shareholder and is comfortable with his holdings.
If you are planning on participating in Twitter's IPO, or investing in any other social media platform, be sure to use Smart Stops' portfolio analysis software to keep your money safe.
Categories: Stock News