Free to use, Twitter has only recently started earning revenue through advertising. Research firm eMarketer.com estimates Twitter’s revenue will double in 2013, to more than $580 million, then climb to $950 million the following year.
Twitter’s IPO will very likely make its early investors and founders very wealthy. Right now, more than 50 institutions and individuals own shares from direct purchases, acquisitions and secondary sales. Famous names like magnate Richard Branson, Saudi Prince Al-Waleed bin Talal and actor Ashton Kutcher own shares, along with a host of lesser-known venture capitalists.
Even if you’re not among this lucky group of individuals, however, there are still ways you might profit from Twitter’s IPO.
As in most IPOs, non-insider investors are better served with less risk by waiting several days for the hype to settle down before buying in. IPOs are notoriously volatile and suitable for only the most sophisticated trader on the first day of trade.
How Can You Profit Now?
There are two main avenues in which individual investors may profit from Twitter’s IPO: a social media exchange-traded fund (ETF) and a venture capital firm that holds about 15% of Twitter.
Global X Funds (NASDAQ:SOCL)
This ETF is made up of a basket of social media companies from the United States and Asia. The ETF is up more than 40% this year and will likely obtain shares in Twitter as soon as possible. In addition, China’s Alibaba Group is considering going public soon, and that could also substantially boost the value of this ETF.
GSV Capital Corp (NASDAQ:GSVC)
This closed-end management firm owns about 15% of Twitter’s investible assets, along with several other technology companies. Basically, this firm obtains private shares in pre-IPO companies in the hope of successful offerings. It may have a huge winner with Twitter.
Risks to Consider: We only have to look back as far as Facebook’s IPO to see the risk of initial investment in IPOs. While Twitter might not flop like Facebook, there are still plenty of unknowns and risks involved with its IPO.
Action to Take –> Although GSV Capital may be suitable for risk-taking, sophisticated investors, I lean strongly toward the Global X Social Media ETF as the wisest way to participate in the early stages after Twitter’s IPO because it spreads the risk across the social media space. In addition, the hype surrounding Twitter and the potential Alibaba Group IPO should result in profits for this ETF.
This article was originally written by David Goodboy and posted on StreetAuthority.
Warren Buffett’s Top 5 Stocks
Buffett’s firm, Berkshire Hathaway, holds dozens of stocks. But these five make up 75% of its portfolio… worth $65 billion. Click here to get Buffett’s top 5 stocks plus his 16 latest buys, FREE.
