Popular micro-blogging website Twitter could be valued at $11 billion if it goes public in 2014, according to a report by specialist financial researchers Greencrest Capital.
This would suggest that the company has regained value that was lost during the shambolic Facebook IPO (initial public offering) in 2012, which pushed Twitter’s value down to $9 billion.
The valuation is based on trading in secondary markets. However, Greencrest analyst Max Wolff admitted in an interview with Forbes that using the secondary market to calculate enterprise value is a “very difficult and opaque process”.
He added that speculation about an acquisition by Apple has helped to boost Twitter’s valuation.
“That said, Twitter is up since the Facebook IPO and is now valued at northward of $11 billion. This makes sense as growth in users and new monetisation efforts are both yielding fruit and pointing toward a good 2013 for Twitter,” said Wolff.
Twitter has still not announced when it intends to go public. Last year, co-founder of the website Jack Dorsey said that an IPO will happen “when we feel the company is ready for that milestone.”
Commenting on the news, Robert Marcus, CEO of QuantumWave Capital, an investment bank for early stage technology companies, said that talk of a Twitter IPO raises serious questions about the rationale of public offerings for such companies.
“We have already witnessed Facebook’s IPO going from the greatest in history to a ‘debacle’ in less than 48 hours, dropping from an early high of $45 to $19 a share. While early investors and management made huge profits from the IPO, the public, representing the necessary ‘P’ in IPO, suffered,” he said.
“Twitter, like Facebook, notwithstanding its success as measured by customer adoption, faces substantial challenges such as the monetisation and the development of a sustainable business model, particularly over mobile.”
He added: “The last thing that Twitter needs is an IPO. Twitter should be stabilised and grown on its own organic revenue-generating capability.”
A recent survey of private equity and venture capitalist professionals by financial adviser Grant Thornton revealed that technology IPOs, in the UK at least, are likely to remain scarce in 2013.
Fewer than one in ten private equity professionals see an initial public offering (IPO) as a credible option for technology companies in the next 12 months, despite efforts by the London Stock Exchange to encourage more technology companies to go public.
However, tech M&A firm Magister Advisors predicts that at least one European next-generation technology company will achieve a $1 billion value through a sale, IPO or fundraising in 2013.
According to Victor Basta, managing director of Magister Advisors, momentum has been building in this area for several years, and VC-backed technology exits in Europe reached a high water mark against the US in 2009-10, with European exits having a value of around $15 billion against $30 billion in the US.
Marcus added that irrational valuations are set to continue with the mobile internet, which has been marked in the space of 12 months by a “simultaneous bubble and anti-bubble” between different groups of companies, as well as “a period of hyperinflation followed by a period of hyperdeflation” for most of the leading companies.
