Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
Stocks fell for the fourth straight day as the S&P 500 (^GSPC 0.02%) and the Dow Jones Industrial Average (^DJI -0.11%) declined 0.3% and 0.4%, respectively. It's becoming increasingly difficult for investors to ignore next Monday's deadline for lawmakers to avoid a government shutdown (not to mention the debt ceiling, which the U.S. is expected to hit around mid-October).
Twitter gears up while Facebook soars
On Monday, I wrote that the cost of market failures is rising, including for the companies that operate exchanges. Standard & Poor's had just released a report warning exchanges that increasing "operational risk" could prompt credit-rating downgrades, and it included the following quote: "Nasdaq's (NDAQ 0.67%) operational glitches, for example, could damage its franchise." The damage is already done, if today's reports that micro-blogging platform Twitter is leaning toward listing its shares on the New York Stock Exchange are accurate.
Less than two weeks ago, Twitter filed with the SEC to go public in what will be the hottest initial public offering (IPO) since Facebook's (META -0.52%) shambolic May 2012 listing. While the Nasdaq is the natural venue for a technology company like Twitter, Facebook's experience will hardly have given Twitter executives much confidence, particularly as they are said to want a low-profile IPO. (Tip: No matter how smoothly it goes, that's never going happen, guys.)
Nasdaq badly bungled Facebook's IPO due to a combination of technology problems and poor decision-making that left 30,000 share orders stuck in the system for more than two hours. The SEC ultimately assessed a $10 million penalty on the exchange, the largest such fine levied on an exchange. Nasdaq also established a $62 million fund to compensate banks that had suffered related losses.
Still, while this failure (and other mishandled aspects of the IPO) produced a public relations fiasco that haunted the company for months, Facebook's shares have been in rude health since the company reported that revenues linked to mobile devices are set to exceed those from PCs:
In fact, the stock set a new record high today on the back of an upgrade from Citigroup on the basis of the following observation (among others):
Following several conversations with advertisers and agencies we believe the factors driving the sudden inflection and growth in the second quarter are sustainable and that there are a number of factors that should contribute to further growth and gains, and potential upside.
The mechanics of share trading and, even more so, sentiment can certainly impact stock prices over the short term, but over the long term, investors are focused on company fundamentals. Whether Twitter ultimately selects the Nasdaq or NYSE ought to be immaterial to investors. Far more important is how effectively Twitter is monetizing its platform -- we'll have to wait to see the offering documents to get a better idea of that.
