Drop In Twitter Shares Raise Concern Over Future of Private Tech Companies; Snapchat, Pinterest Could Be Affected
Twitter shares have fallen again as uneasiness in the overall stock market has affected various tech companies that do not have strong growth projections.
While similar tech companies have been facing a dismal start in the stock market this year, Twitter has received much of the attention from Silicon Valley as questions arise about just how low Twitter shares would be in the days ahead.
In April 2015, Twitter shares were still priced at a commendable $51 but then fell to $19.32 on Jan. 12, Tuesday, according to The Information.
Moreover, the problem of Twitter shares is important because it could affect how private tech companies are valuated.
These companies could soon see themselves appraised using Twitter as a standard, among other public tech companies that have been performing poorly in the stock market.
Private, Late-Stage Tech Companies
Menlo Ventures managing director Venky Ganesan said that companies that are valued for their long-term, strategic growth would be the most affected by the current slump of tech company stocks such as Twitter shares.
Noting a shift in investor psychology, Venky Ganesan said that people would likely change how they view late-stage companies that are recognized less for the immediate, financial prospects and more for the expected successful ventures in the long run.
Similarly, Draper Fisher Jurvetson partner Josh Stein said that the current unstable characteristic of companies on Wall Street would make private investors wary about putting their money on late-stage companies.
Thus, the slump in the value of Twitter shares could persuade private investors to support companies with actual high cash flow.
While late-stage private companies could face the consequences of falling Twitter shares the most, Josh Elman of Greylock Partners noted that early-stage companies capable of readily delivering impact similar to the initial growth spurt of Twitter need not worry as much.
Specifically, late-stage tech and media companies such as Snapchat and Pinterest should be wary of the decreasing value of Twitter shares in the public market.
Both companies do not have a remarkable financial performance, but they still have high value because of the expected strategic growth in the long run. The same valuations happen to other private, late-stage, consumer media businesses.
Falling Twitter Shares Not A Cause For Alarm
Even if Venky Ganesan and Joshua Elman have expressed concern over the poor performance of Twitter shares, Lux Capital venture firm partner Bilal Zuberi believes that the current state of public tech companies should not spell disaster for private tech markets.
For Bilal Zuberi, the case of Twitter shares is an outlier that does not have to affect the future of private consumer media and tech companies.
“It’s a bit unfair to think Twitter’s problems are reflective of all social media companies,” Zuberi said. “It’s unclear which direction they want to take this.”
The Lux Capital partner was referring to the unusual management problems hounding Twitter.