Tech Watch: Twitter Shares Brush Off Lockup Expiration; A Target for Apple

Twitter's float increases, while a potential target for Apple raises a funding round.

Feb 14, 2014 at 10:15AM

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.

It's Valentine's Day, so perhaps investors are distracted this Friday morning, as U.S. stocks are little changed, with the benchmark S&P 500 and the narrower Dow Jones Industrial Average (DJINDICES:^DJI) up 0.10% and 0.20%, respectively, at 10:15 a.m. EST. Nevertheless, today could turn out to be a test for shares of Twitter (NYSE:TWTR), as its first post-IPO share "lockup" expires. Meanwhile, Jawbone has nearly completed a funding round that values the private wearable technology company at $3 billion. Richly valued, yes, but with Apple (NASDAQ:AAPL) CEO Tim Cook recently saying "we have no problem spending 10 figures for the right company," Jawbone is (or ought to be) a legitimate target.

 According to SEC filings, up to 9.87 million shares of Twitter become eligible for sale by nonexecutive employees today. Bloomberg reported that if all the shares were to be sold on the open market, the stock's float (shares available for trading) would rise by by 12% to 90 million, so it represents a sizable slug. (Note, however, that S&P Capital IQ lists the current float as 284 million.)

No insiders sold shares as part of Twitter's November initial public offering, so they have not been able to realize massive paper gains on their holdings; Twitter's stock has more than doubled from the $26 offering price. However, the expiration of the lockup appears to be having no adverse effect on the stock price this morning; in fact, shares are up 2% at 10:15 a.m. EST. That contrasts sharply with Facebook, which fell to a new low below $20 on Aug. 16, 2012, as a 90-day lockup expired. (Note, however, that the 271 million Facebook shares that became eligible for sale on that day represented a much larger proportion of the-then 421 million share float than is the case for Twitter.)

Personally, I'd recommend those insiders take some gains off the table. Last week, I wrote that "the overvaluation of Twitter shares was sufficiently extreme that I'm not at all convinced that today's [post-earnings] decline has eliminated it. ... It's far from obvious that the shares offer much value at $50." This week, New York University business professor Aswath Damodaran, the guru on company valuation, produced an updated estimate of Twitter's intrinsic value, which he puts at just $20.57. The blog post in which he describes how he arrived at that value ought to be required reading for anyone who owns or is considering owning the shares.

Meanwhile, one of the Twitter's largest investors, Rizvi Traverse Management is reportedly leading a funding round for Jawbone, which sells fitness wristbands and Bluetooth headsets, that would value the company at $3 billion. Last week, Wired highlighted 10 companies that Apple could acquire instead of buying back all that stock; most of the candidates had me shaking my head, but, of Jawbone, Wired wrote:

Of all the possible acquisitions Apple could make, San Francisco-based hardware designer Jawbone is the most obvious fit. ... With Nest off the table, Jawbone is the next-most-obvious option for Apple to leap forward in wearables and Internet of things-connected devices.

I agree. Like Nest, which Google recently acquired for $3.2 billion, and Apple, Jawbone clearly understands the power of design in selling premium-priced products.

Better than Twitter or Apple: The 1 stock you must own for 2014
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.

Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool recommends Apple and Twitter. The Motley Fool owns shares of Apple. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information