Yesterday, Twitter’s IPO made major headlines, with the stock locking in a stunning first-day gain of 73% above the listing price. For dividend investors, however, Twitter’s IPO was perhaps of no concern, considering the volatile nature of newly listed stocks. But looking at how the market priced the highflying social media company does provide an important lesson for true value investors to remember.
Why #Pricing MattersWith Twitter’s stock closing at $44.9 on Thursday, the San Francisco-based company now has a market capitalization of about $25 billion. Some analysts, however, have estimated Twitter’s valuation to be closer to $31.7 billion, taking into account options, warrants and restricted stock. Using basic finance principles, this would put Twitter’s stock at 26-times its 2014 sales estimates – a blatant red flag that would lead any true value investor to run in the opposite direction.
And while many of you are likely not even considering buying a company like Twitter, the lesson behind the company’s wild fir
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