Twitter, Another Successful Goldman IPO

Sell-side analysts have been focused on the wrong things with Twitter, eyeballs and pageviews instead of growth and profitability. That changed today.

Feb 6, 2014 at 6:00PM

Another successful Goldman IPO. Goldman Sachs does a great job getting every possible dollar for a company it's taking public by dressing it up. They do a great job for the investors who are allocated IPO shares as they pop on the first day of trading. They also make a lot of money for short sellers, often less than a year after the first trade. The only people who don't benefit are the other 99.5% of America. My personal favorite of Goldman's IPOs before yesterday was A123 Systems in 2009. Priced at $13.50 a share, it closed the first day at $20.29...and closed yesterday at $0.12.

It almost seems their goal is to grow your net worth...into their net worth.

The biggest concern with Twitter (NYSE:TWTR) going public was that its best days are behind it. After last night's earnings report that seems like it could be the case. Twitter raised $1.82 billion in the IPO and the banking syndicate (their term, not mine) received 3.25%, or $59.2 million in fees. This is a hefty payday for getting the highest possible price for selling private company shares to the public.

MAUs hit a wall
The trouble in the quarter stems from the slowdown in monthly active users. This is the average number of people who are active on Twitter in a given quarter and are the potential consumers of the advertisements placed on its site. This number helps gauge how fast the platform is growing but it doesn't indicate how much revenue the company will make or how profitable it will be. That said, some derivative of this metric is what professional investors used to come up with a fair price for the stock. If that's the case, this is a real problem because the growth is coming to a screeching halt:


The second line in the model above shows how many more people are on it this quarter vs last quarter. In the December quarter, 9 million more people were active than in September. The problem, however, is that this growth is slowing quickly. 

Timeline views slowing causes concern but shouldn't
There was a second metric that is also causing concern among investors but it shouldn't. The "timeline views" declined sequentially and was brought up as a concern by sell-side analysts on the call, but this shouldn't be an issue because third party software such as TweetDeck creates a scrolling headline window that keeps a person from having to refresh their screens. Its these screen refreshes that increase the number of timeline views. On the call, management said that timeline views fell because new features connecting conversations in a more seamless manner required fewer page refreshes but that data point doesn't fit well into an excel spreadsheet so it will probably be forgotten.

These two issues should have almost no impact on long-term profitability for the company since advertisers only pay when users click through to their promotions. Twitter is still the only place that consumers go to connect with sports figures and celebrities on topics that you share an interest in and it isn't going to change because of a 20% reduction in the share price.  What should you do here?  Keep using and enjoying the service but don't touch the stock until "the professionals" figure out a new way to value this unique company.

Here's our top stock!
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


David Eller has no position in any stocks mentioned. The Motley Fool recommends Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers