44°
Mostly sunny
TUE
 74°
 45°
WED
 74°
 53°
THU
 72°
 52°
FRI
 73°
 52°
SAT
 69°
 45°

Challenges abound for Twitter heading into IPO

"They have a nice and interesting base to build upon, but an exciting business with lots of users doesn't necessarily generate returns," says James Gellert, CEO of Rapid Ratings, a subscription service that examines the financial health of companies.

Rapid Ratings gives Twitter's financial fitness a rating of 19 on a scale of 100. Gellert says that 90 percent of the companies with a rating below 40 have defaulted on their debt at some point. By comparison, the firm rated Facebook at 73 just before its May 2012 IPO and Google at 80 ahead of its August 2004 offering.

With 232 million users and an IPO poised to as much as $2 billion, Twitter is unlikely to go bust like so many of the companies that disappeared after the dot-com bubble burst in 2000. So many investors are optimistic about the company's future that Twitter on Monday seized on the demand for its stock and raised the projected price range of its IPO to $23 to $25 per share, up from an earlier target of $17 to $20.

Despite that enthusiasm, Twitter faces a slew of hurdles that range from an outsize proportion of international users —who generate less revenue than their U.S. counterparts— to concerns about a slowing rate of growth at a time when its user base is less than a quarter of Facebook's.

Although they both compete for people's attention and posts, Twitter and Facebook work differently.


© The Press Democrat |  Terms of Service |  Privacy Policy |  Jobs With Us |  RSS |  Advertising |  Sonoma Media Investments |  Place an Ad
Switch to our Mobile View