IPOs have been hot lately, but Twitter itself lists dozens of reasons why investors should steer clear -- or at least think twice before buying shares when they become available to the public. What should you do?
Why IPOs Are Back In
Favor Again • Facebook has bounced back • New IPOs are producing big first-day pops Two key factors are supporting the IPO market:
Soaring New IPOs Draw Interest
First-Day IPO Jumps Are Back • FuelEye rose 80% in its first day. • Rocket Fuel and Foundation Medicine both posted 90% to 100% first-day gains. • Sprouts Farmers Market soared 123% on its first day as a publicly-traded stock.
Twitter’s 54 Risks But Twitter
Lists Dozens of Business Risks In Its Registration Statement 1. Twitter could fail to grow its user base or see engagement decline. 2. Users could stop contributing valuable content. 3. Advertising revenue could fall. 4. Quarterly results could fluctuate wildly. 5. Twitter can’t control the technology its users rely on to use its service.
Twitter’s 54 Risks 6. Twitter
might not be able to expand internationally. 7. Twitter operates in an unproven market. 8. Twitter might not be able to become profitable. 9. Users need unimpeded access to the Internet. 10. New products and services might not make money. 11. Spam could drive users away. 12. Twitter has to manage its growth well. 13. Service disruptions could hurt Twitter’s business.
Twitter’s 54 Risks 14. Governments
could censor Twitter or restrict access. 15. Promoting Twitter’s brand could be unsuccessful. 16. Negative publicity could hurt Twitter’s reputation. 17. Strategic partners could fail to meet expectations. 18. Twitter’s long-term focus could hurt short-term results. 19. Twitter’s international operations have special challenges. 20. Software bugs could cause problems for Twitter. 21. Laws and regulations covering Twitter change rapidly.
Twitter’s 54 Risks 22. Investigations
could cost Twitter money. 23. Privacy concerns could drive users away from Twitter. 24. Cybersecurity breaches could deter potential new users. 25. Lawsuits related to content could hit Twitter’s income. 26. Threats to intellectual property rights could hurt the company. 27. Defending intellectual property claims is expensive and could still fail. 28. Twitter relies heavily on open-source software.
Twitter’s 54 Risks 29. Tax
liability on certain share awards could be costly. 30. Future capital could prove unavailable when needed. 31. Inaccurate assumptions could lead to strategic mistakes. 32. Twitter needs strong employees to grow effectively. 33. A change in corporate culture could hurt Twitter’s success. 34. Search engines and app stores could stop delivering traffic. 35. Twitter’s mobile apps could fail to gain widespread use.
Twitter’s 54 Risks 36. Future
acquisitions might not work out as well as hoped. 37. A failure of internal financial controls could produce inaccurate information or violate disclosure regulations. 38. Investors might dislike limited JOBS-Act disclosure rules. 39. Exchange rates could fluctuate adversely. 40. California earthquakes could hit Twitter’s headquarters. 41. Tax laws could produce greater than expected liability. 42. Intangible assets could prove less valuable than hoped. 43. Use of tax losses might be limited.
Twitter’s 54 Risks Twitter Also
Lists 11 Stock Risks 44. Current leaders will retain substantial control of Twitter. 45. Takeover defenses could deter a lucrative buyout. 46. Shares might not trade actively after the IPO. 47. Shares will be volatile and could lose value. 48. Restricted stock could be sold after lockup periods end. 49. Outside information could be misleading or incorrect. 50. Twitter might not use the IPO proceeds profitably.
Twitter’s 54 Risks 51. Book
value dilution will occur after the IPO. 52. Wall Street analysts might pan the stock or stop following Twitter entirely. 53. Twitter doesn’t expect to pay dividends soon. 54. Trades on private exchanges could have been at higher prices than Twitter’s likely post-IPO price.
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