Twitter shares soar as investors ignore 'bubble' warnings

Nov 7, 2013

Earlier today we reported: It's that 'B' word again. Twitter has yet to make a profit but its shares will today be available for US$26 (each). It looks like the market has yet to learn from all of its friends on Facebook. Did somebody say 'bubble'?

In May last year, of course, Facebook got greedy, overvalued itself and promptly suffered an almighty share price crash from which it has is yet to fully recover. At this point Twitter seems to be following a similar trajectory - more modest offer ranges ($14-$17) were talked about earlier this month but as the date loomed large the price has been bumped up to today's $26.

Facebook has more recently recovered its composure, mostly because it has managed to get mobile advertising working for it.

Twitter, of course, was inherently more mobile friendly from the off, but it not only has yet to make a profit on its rather paltry revenue stream, but its losses appear to be widening. It has bumped up its revenues - doubled to $168.6m in the three months to the end of September - but its net loss actually trebled from $21.6 million last year to $64.6 million this.

But then this is not about rational investment decisions based on current performance but about faith in the magic of social media and the ability of online services to scale gracefully until the cash register goes ker-ching. It's a gamble, a flutter...

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