
Twitter announces IPO: The Valuation - Maven911
http://aswathdamodaran.blogspot.ch/2013/10/twitter-announces-ipo-valuation.html
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001sky
Like instagram, the value of twitter is not ( _per se_ ) in its cash flow, but
in its strategic function as a competitor to other media outlets (eg
newspapers) and as a complement to others (eg, live TV commenting system).
This makes the market value and the (true) cash-flow value perhaps non-
reconcillable, in accounting terms.

Instagram was worth $1B to FB (without any cash flow), because it could easily
_destroy_ 5x-10x that amount from FB's IPO valuation. A model for "valuation"
is good CYA but nobody "needs" it when you are playing with orders of
magnitude ROI. Just something to think about, when looking at valuation
scenarios from Academics.

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stormbrew
While this (the second paragraph in particular) is a valid point, I'm not sure
I see how it applies here. The value of a stock on an exchange is an aggregate
of that stock's value to many investors. The value of a stock to any one buyer
will obviously be different, whether it's a grandma picking her own stocks or
a large institutional player considering a buyout. The former is relevant to
the IPO in the short term, the latter not so much.

Basically, I'd expect that the aggregate value on an exchange (as opposed to a
buyout) going forward is going to tend to be more about the fundamentals (as
the only thing that all investors have in common information-wise). At least
in a scenario where there is no obvious buyout possibility in the short term.

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001sky
_The value of a stock on an exchange is an aggregate of that stock 's value to
many investors._

This is a good point. But think of supply and demand, and how the market
clears. Are the VC investors going to sell based on the same models that the
retail investor is using? Probably not...And since the price is the <price at
which bid/ask equate>, you need to look at the diversity of views on
valuation. I guess that is more what I am saying.

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Maven911
Just a little background on the author, hes a NYU prof and he's considered one
of the formost experts in valuation, having written many book and articles on
that subject

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ihsw
In the midst of all these pie-in-the-sky numbers being thrown around, one has
to wonder if it will be another FB.

[http://en.wikipedia.org/wiki/Initial_public_offering_of_Face...](http://en.wikipedia.org/wiki/Initial_public_offering_of_Facebook#Subsequent_days)

68 days after the IPO, 47% of its initial value was wiped out. It has since
recovered but the suspicion stands -- were we fleeced? Was the price
artificially and strategically pumped up so as to encourage investment?

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drharris
I plan to buy Twitter stock as a hedge against actual intelligence in the
investing community. Seriously, the true valuation on a non-profitable company
with no reasonable way to make a profit is $0b.

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Maven911
That is until the ad money starts generating that much neede revenue. For now,
valuations can be done on multiples of assets, sales or market value of
similar companoes

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drharris
Twitter ads are never going to produce a substantial profit. Google and
Facebook have the ability to mine a ton of data that will eventually allow
them to provide perfectly targeted ads that 1) don't annoy you, and 2) produce
a ton of profit. Twitter knows when you last went to the bathroom. I'd expect
the ads to increase, become obtrusive, and people leave in masses if that is
their monetization end-game.

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nwzpaperman
"I will assume that Twitter's revenues will reach $11.5 billion in 2023. That
will be more than a twenty fold increase in revenues and translate into a
revenue growth rate of 55% for the next 5 years, scaling down to stable growth
(of 2.7%) in year 11."

"Why not use your knowledge of the future to play the stock markets? We could
make trillions." "Why make a trillion when we could make... billions?"

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dizzystar
My main issue with that number is the assumption that Twitter will still be
around or significant by 2023. If the past 10 years are any indication, the
internet user-base is fickle and moves around a lot. There really isn't enough
data-points from the past 10 years to reliably predict trends for the next 10
years, unless you want to say that there will be tons of carcasses and has-
beens.

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technotony
You could have said the same thing about Google during their IPO, and they are
doing just fine.

Not to say you don't have a point, but I think the point you are making is
less to be reflected in the revenue number but in the probability of the
company surviving, which he put's at 100% in his assumptions... that does
sound rich to me!

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devx
They are not really the same thing. We'll always need search, and unless
Google falls behind, we'll keep using Google if their search results are the
_best_. Or unless everyone decides en mass that they can live with less good
results, if the new ones offers 10x more privacy, and in a world where
NSA/governments run rampant with the data collection and abuse it. Right now
that's pretty much the only thing I could see Google dying from. That and
laziness, but that's less likely to happen.

Communications and social platform, while they can have some pretty strong
network effects, are not as important, even if they keep improving them,. A
new generation of users might switch from Facebook to Snapchat, and it's
irrelevant if Facebook adds the same kind of features. A new generation of
users won't switch from Google to Bing, or something else, unless, as I said,
Google stops providing the best results.

Whatsapp is used by more than 300 million users right now, more than Twitter.
Do you think Whatsapp will still be as relevant 10 years down the road? The
chances are pretty small, I think.

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eru
> [..] we'll keep using Google if their search results are the best.

People just need good enough search, not the best.

