Final Word
Count: 504
This essay seeks to summarize and discuss the financial
activities of a company and how it affects a company’s public relations.
Hulbert (2014) discusses the drop in shares of Twitter in
the duration of the next four years that is based on a scale that tracks growth
of sales. It indicated that there would be more struggles in store for
Twitter’s financial future. The article also discusses Facebook’s finances in
brief.
According to the Hulbert (2014), Twitter’s shares have gone
down 45% from recent highs while Facebook’s shares are down 19%. Grounded on a
common evaluation formula that predicts where freshly public stocks will be
trading five years after their initial public offerings, Mark Hulbert, the
founder and editor of Hulbert Financial Digest, concluded that Twitter and
Facebook may be in for more bad news. The sales-based formula that was used in
the assessment was constructed on the basis of how fast a company’s income will
develop over its first five years as a public listed corporation and what its
price/sales ratio will be. It was stated in the article that spokespersons from
both corporations failed to comment on the results of the estimates, which
suggested that Twitter and Facebook shares would be much lower than where the
messaging services currently trade.
The article referred to previous research on speed of sales
growth of newly public companies carried out by Jay Ritter, a finance professor
at the University of Florida and Martin Kenney and Donald Patton, both from
University of California, Davis. It was from Ritter’s records that Twitter’s
stock in November 2018 and Facebook’s stock in May 2017 were calculated. Based
on the results of possible 45% and 50% drops in stocks for the companies
respectively, Ritter stated that it would not be unmanageable for them to avoid
that outcome. According to him, Twitter, along with social network giant
Facebook would either have to increase their sales quicker than average or
increase their price/sales ratio. While both situations are possible, they also
pose as risky acts.
Hulbert (2014) suggests that investors may instead gamble on
high-tech companies that have more practical evaluations, as the Internet
sector is more likely to change unpredictably than the overall stock market in
comparison.
Based on the article, it seems to be that investors are now
more cautious or more rational toward what they are buying. In my opinion, both
companies did not put enough emphasis on their sales strategies. While it is
inherently important and smart that they invest in their future growth now,
they are simultaneously sacrificing their earnings, which in the long run may
not be beneficial to the finances of both corporations. From a public relations
angle, as the spokespersons for Twitter and Facebook refused to comment on the
findings, there is a risk of both companies’ reputations being scarred. From
the article, it is evident that both corporations need to be able to prove two
things to investors; that they can dramatically improve communications with advertisers
and they can increase engagements with users.
Reference
list:
- Hulbert,
M 2014, ‘Twitter shares four years from today – down 45%?’, Market Watch, 12 April, viewed 13
April 2014, http://www.marketwatch.com/story/twitter-shares-four-years-from-today-down-45-2014-04-12.
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