In less than two days, options will begin trading on Twitter (TWTR), but many are already betting on the stock's downside using other instruments. According to Bloomberg, structured product investors in Europe are betting heavily on TWTR's decline. Of the products listed on European exchanges that are tied to Twitter, 9 of the 10 most traded securities are put warrants. The warrants suggest the price of the microblogging giant will drop below $28 by June. Apparently, investors are concerned about the profitability potential of the company, which isn't likely to begin turning profits until 2015. While I agree that TWTR shares appear to be overpriced, I also think it's a mistake to be overly concerned about profits. At this stage, customer and revenue growth should be front and center. It will be interesting to see what data comes from the options market. (VIEW LINK)
I'm an investments analyst for a US-based independent investment research firm. My focus is on economics, options, and all types of stocks, but especially tech, Internet, and renewable energy companies. I have experience as a options market...
No areas of expertise
With a float of this profile there were always going to be people concerned about the valuation and betting against it. My view is that whilst there will be volatility in the stock price and perhaps a pull back at some stage the momentum is with twitter and the will continue to grow and innovate.