How Twitter 'Tweets' Can Inform Investors About Twitter's IPO
It's May 19 2012, and Mark Zuckerberg is readying himself to ring the morning bell from company HQ in Menlo Park. Hundreds of disciples watch in anticipation of Facebook's grand public listing. The image wouldn't have been out of place on a billboard for a future sequel to the Social Network. But unlike certain movies, the IPO process is by no means a straightforward narrative, with many involving hard-to-follow sub-plots. From regulatory filings, to underwriters, book runners and then road shows by senior management to stoke investor interest, IPOs are complex affairs.
Amid all this, investors need to decide whether they believe in the current and future value of a firm sufficiently to back the IPO and invest in what can be a high pressure, high stakes, highly competitive scenario. The decision-making process should be centred on carrying out complete due diligence. In reality this equates to the ability to analyse all data points that might affect current and future valuations. However, currently investors have no choice but to rely on standardised reports, pre-rehearsed road shows and if they have enough clout, the one on one, yet controlled Q&As with senior management. Essential as this information is, it is only part of the story.
New data can now be found online. This presents a huge opportunity for the investor community. It enables them to access previously out of reach information on potential investments. So why isn't this information being shared proactively with investors? It is simply because there are rules preventing equity research analysts from accessing social media, forums and other online information due to compliance restrictions.
These restrictions mean that investors run the risk of missing golden nuggets of investment data. Customer sentiment is an obvious candidate. While consumer analysis is covered in traditional reports, individuals and businesses are increasingly sharing their experiences of products and customer service, complaining and pledging their allegiances via social media and other online forums. Analysed correctly, this can provide supplementary insights that can help an investor rate the loyalty and strength of a company's customer base and even uncover long term behavioural trends.
The same can be said of employees. Online information can provide vital information on a company's workforce. For example, a recent high profile IPO in the UK of the British postal service, the Royal Mail, was plagued with potential strike action. A workers forum highlighted clear intelligence; it stated 233 employees voted to strike (85% of the ballot) and 13 employees voted against (5% of the ballot). This is need to know information for potential investors.
Whether it's from customers, employees and union members or suppliers, online channels hold important investment insight. It can be mined for the company in question as well as its competitors, key partners or subsidiaries to provide the complete due diligence required.
In the case of the upcoming Twitter IPO, online c-level marketing executive viewpoints will be especially important to monitor because they could provide insight on the site's advertising-focused revenue model. Unearthing facts, like a crucial CMO blog post that may reveal advertisers' interest in Twitter, would aid the investment decision-making process. For other public offerings, different views will be relevant, including CTOs, CIOs, Heads of Sales and Business Development and Corporate Strategy teams. These individuals can provide additional perspectives that most investors won't be able to collate themselves because they simply don't have the time or technology tools in place. In fact, the sheer volume of data online makes it hard to sift through for useful content. However, with the right combination of automated analysis and expert human interpretation, it is possible.
With this year's most hotly anticipated public offering just round the corner, it is important that the wider investor community cuts through all the hype to access the data most useful to their investment strategies. Investors no longer have to just rely on standard reports about the company and its business prospects. Exploring new ways to access fresh information is an essential step. And for those considering whether or not they should invest in Twitter, this could give them the edge when that bell rings.
