As a father of two with twins on the way, Ironfire Capital founder Eric Jackson is to be forgiven for having babies on the brain. Where others look at their portfolio and see stocks, Jackson sees a small family of positions he’s hoping to nurture into maturity. Through that lens Facebook Inc(NASDAQ:FB) is a child Jackson already has and he’s expecting Twitter in a month or two. “I love both my kids equally. They’re different,” Jackson says of the two social media giants. “I think people have to keep that in mind when they’re comparing these two companies.”
After the way Mark Zuckerburg and company behaved during the IPO it’s no wonder the stock got spanked for more than a year. “Facebook was a gouged out, max out the credit card IPO,” Jackson says. Judging by the way it priced the offering, Facebook’s strategy was to gather every crumb, collect every penny and leave nothing for the unlucky few “lucky” enough to get a share allocation.
In both its approach to the IPO process and maturity of its business model, Twitter isn’t anything like Facebook. Facebook didn’t actually need the cash for business operations. The company was profitable and huge from day one. The share dump was as much about cashing out early investors as it was growing the business. With a much less mature concept, negative cash flow, and limited user base ,Twitter is more akin to Yelp Inc(NYSE:YELP) or LinkedIn Corp(NYSE:LNKD), two companies that have made shareholders money since day one.
At the offering price Facebook was worth more than $100 billion. It had revenues of nearly $4 billion and was netting better than $1 of profit from each of its nearly one billion users. Twitter will debut at a market cap under $20 billion. This year Twitter will lose somewhere north of $100 million on about $600 million in revenue. As of June 30th Twitter had fewer than 1/4 the number of users as Facebook did the day it went public.
You can see the full “Breakout” interview below:
ETFS Holding Facebook Inc(NASDAQ:FB)