To Buy Or Not To Buy? The Twitter Question
By Aswath Damodaran
I think Twitter is a good company, with the potential to be a great one, but based on my views of the company, it is not a good investment for me at $27, $35 or $45 a share.
Assuming that you were not able to buy the shares at the offering price, should you buy now? And if you did get the shares at the offering price, is it time to cash out? The answer depends upon not only what you think about the company and its prospects but also on whether you view yourself as a trader or an investor, since it is not only possible but likely, in my view, that Twitter was both underpriced and over valued at its offering price.
In the pricing process, bankers gauge market mood and momentum, trying to determine the “right” price for the stock, not wanting to relive the Facebook fiasco, where the stock went into a tailspin after the offering, but also not trying to avoid the LinkedIn scenario, where the stock doubled on opening day.
Read full article as published in Tech Crunch
Aswath Damodaran is the Kerschner Family Chair in Finance Education.