Twitter’s market value has reached $4 billion just a month after it raised $200 million in funding.
According to SharesPost, a secondary market for buying and selling stock in privately held companies, Twitter‘s value has jumped to $4 billion, based on recent transactions. That is a $300 million increase in value in just over a month, based on the $3.7 billion valuation set by its funding round in December. Kleiner Perkins Caufield & Byers led Twitter’s most recent round of funding.
Twitter’s market capitalization will likely continue to rise in the near future. Several recent stock purchases on the private markets imply that Twitter’s value is more than $6 billion. While these smaller transactions aren’t a definitive basis for defining Twitter’s value, they are a benchmark that can help determine whether a private company’s value is trending up or down.
Facebook is still the king of private markets, though. While its most recent funding round valued the company at $50 billion, its value on the secondary markets has skyrocketed to $75 billion.
Secondary markets for privately traded companies are currently the subject of an SEC probe over whether they violate SEC regulations.
Ask yourself why. Why is Twitter valued at $4B? Is it because of potential income or existing revenue streams? I would like to see a breakdown of criteria used to determine this value. Facebook valuations are justified because of tremendous revenues. Twitter on the other hand could be a money pit if it cannot monetize.
That may be a part of a good answer. But for any wise investor to seriously consider putting that kind of money into a project there should be earnings on the horizon, not just data merit. Investors may be getting in at a steal if Twitter can figure out how to generate serious revenue. However, if Twitter cannot bridge their current gap to income, any investment or valuation is a waste of time.
There is other possible value to consider, which would probably require the sale of Twitter to be realized. Twitter and the consumer eyeballs they’ve garnered may be a tremendous value when coupled with a third party company that can enhance or amplify a cashflow with the addition of the Twitter user and consumer insights. For example, maybe Amazon or Google could justify a big spend on Twitter for the revenue multiplier gained by having direct access to all of the customer information housed in the Twitter database and analytics.