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Public Markets Push Twitter’s Valuation Under Half What Snapchat Said To Seek In IPO

Editor’s Morning Note: Snapchat’s purported, hoped-for IPO valuation is now more than twice Twitter’s current market cap. That’s notable.

screen-shot-2016-10-10-at-10-12-43-am

Shares of Twitter are down sharply today in the opening trading session of the week, following news that more potential suitors are no longer interested in buying the troubled social giant.

As Reuters noted this morning, the removal of Salesforce from bidding contention caused Twitter shares to fall 13 percent at one point this morning. At the time of writing, Twitter has yet to recover in any material fashion from its trading lows.

Today’s fall follows another, recent correction for the company, also predicated on a decline in bidding interest for Twitter itself.

The resulting chart is stark:

screen-shot-2016-10-10-at-10-06-03-am

Legend:

  • :) -> Good day.
  • :( -> Bad day.
  • ? -> Passable imitation of a San Francisco hill.

Results And Comparisons

That second, steep decline pushes Twitter to $17 per share, or around $9 per share less than it went public for several years ago.

That gap in per-share value is slightly ameliorated by Twitter’s rising share count when we calculate its full value—the company’s share-based compensation largesse is vaguely legendary in certain nerd circles.

All the same, Twitter’s value is under sharp pressure at the moment. According to Google Finance, the generators of the above chart, Twitter is worth $12.08 billion at the moment. That’s less than 50 percent of what Snapchat’s holding company, Snap, is expected to command in its H1 2017 IPO. If Snap, a company with far more modest revenues than Twitter, can go public at twice its value, it will be yet another market rebuke of Twitter.

Mattermark investigated the situation on Friday, when the market cap differential was less than half. Our headline at the time made that point clear: “Squaring Snapchat’s Rumored $25B IPO Valuation And Twitter’s Modest $14B Market Cap.” Well.

The above chart underscores our point from last week. Investors, now that Twitter is increasingly dancing alone, are back to valuing the company as they did before: A firm with slowing revenue growth, positive cash generation, GAAP losses, and painful share-based compensation expenses. What is that worth? Less, it seems, alone than as part of a larger firm.

For Twitter bulls, perhaps its now-lower price will make it more enticing. Or optimism is being risked out of Twitter shares by reality and its acolytes.

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© Mattermark 2017. Sources: Mattermark Research, Crunchbase, AngelList.
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