My Shortest Post Ever

by JDH on November 9, 2013

In honor of the Twitter IPO on Thursday, here’s my post for today:


What more can I say?

Twitter is valued at around $25 billion, which is 22 times revenue.  Ponder that for a moment.  Revenue is irrelevant; all that matters is profit, but to justify this ridiculous price analysts are now quoting stock prices as multiples of revenue.  in case you are wondering, Facebook trades at 11 times revenue, indicating it is also grossly over-valued.

If I told you I had a company that generated $1 million in revenue, and $1 in profit, would you pay me $22 million for that company?  Of course not, because with only $1 in profit it would take 22 million years to get your money back.  That’s why revenue is irrelevant, only profit matters.

And yes, I understand that if Twitter can grow it’s revenue, and profit, than perhaps this valuation will make sense, but we are nowhere near that point now.  Not even close.

We live in a world where almost 1 million Americans dropped out of the labor force last month, and we now have a labor force participation rate of only 62.8%, the lowest level since 1978!  And yet a company that offers you the ability to tweet for free is worth $25 billion!

How can this be?  It can’t.  It only appears to be reality because the Fed is printing money to inflate the markets.

Enough said.

(And yes, I do see the irony in me lambasting Twitter but posting a tweet on Twitter).

See you next week.