IPO – What Could It Mean?

A private company is free to act however its owners choose, within confines of the law, of course. Until recently, Twitter was privately held. By initiating an initial public offering, the company is now publicly traded. Twitter is now responsible to a beast other than its customers, employees, and owners: shareholders.

Inviting New Guests

Shareholders generally buy for one reason: profit and the earnings they can gain from it. Twitter is bringing in money thanks to promoted tweetsaccountstrends, and its foray into TV-linked advertising, but it has never earned a positive bottom line. Pressure is mounting for the company to move its ledgers out of the red.

I have no doubt the company’s public offering is related to that fact. No income means dwindling reserves of cash, which is not a sustainable business model – neither is relying on a public offering for money meant to cover operational costs.

That implies that the public offering has a purpose other than the need for cash: new minds working on a difficult problem. Buy outs of “undervalued” companies were a common practice in years past – investors with big ideas buying a majority share of a company and attempting to increase its market value for the benefit of shareholders (and themselves). It seems almost as if Twitter’s c-suite was hoping for something similar.

The Future

No income and an IPO do not mix unless there is hope for something new. Exactly what that something new will be is unclear. The leveraged buy outs I mentioned earlier were not guaranteed successes and sometimes deliberately exploited the company for personal gain, and Twitter’s vast reserves of information are exploitable.

It is widely known that Twitter played an extensive role in the Arab Spring thanks in part to its stance on the privacy of information. It is likely the decision to hold back personal information is no accident and comes from the top of the company.

Shareholders complicate that matter. The question becomes “what will change for the sake of being profitable”? Facebook is well known for using the vast amount of information it collects about individual users to earn a profit – targeting advertisements on the social network is something many companies are willing to pay for. That use of the information is not dangerous in itself, but selling the information to the spy agency of a citizen-scrutinizing-and-critic-censoring country (Iran, China, Russia, sometimes the U.S., etc) would be.

I am fine with Twitter earning a profit (we all need to eat), but not at the expense of its customers personal security. With my knowledge of shareholder function and stock markets, I cannot say for certain what will happen, I just hope Tweeps do not get used and abused by an over-enterprising shareholder or two.

Over To You

So what do you think will happen? How will its IPO change Twitter? Are you a shareholder of the company? Start the discussion in the comments below!

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