How Small Investors Can Still Get a Piece of Twitter

Small Investors Can Still Get a Piece of TwitterTwitter Inc. is the most highly anticipated company to debut its initial public offering (IPO) this year as it sells its story to the big institutional investors who are clamoring to buy shares. Of course, there will likely not be a lot of selling needed for its IPO, as the company will garnish immense interest.

Sorry, dear reader, but we are out of luck, yet again. A popular IPO such as Twitter is never offered to small investors. You have to have major bucks and clout with Wall Street to get in on the deal. The way popular IPOs are sold was supposed to change with opportunities given to the small investor, but it hasn’t; so once again, we are shut out as the rich get richer.

You can probably indirectly get a piece of Twitter at the IPO price via investing in funds or exchange-traded funds (ETFs) that will buy into Twitter at its IPO price. The funds buying will eventually become clearer, but a possible ETF is the Global X Social Media Index ETF (NYSEArca/SOCL), which invests in brand-name social media stocks from around the world.

Based on what we have seen so far this year, technology IPOs are hot and you can expect Twitter to likely double up on its first day from its expected subscribed IPO price of between $17.00 and $20.00 sometime in early to mid-November.

For the average investor, the hope will be that Twitter copies Facebook, Inc. (NASDAQ/FB) in its first day of trading, but I doubt that. (Read “The Plentiful Opportunities I Still See in the Social Media Sector.”) Recall that Facebook opened at $42.05 and traded as high as $45.00 on its first IPO day, prior to settling at $38.23 on May 18, 2012. The stock subsequently plummeted to the $18.00 level, but has since recovered to the current $51.00 range.

Now, I’m not saying that Twitter will have the same fate, but it’s OK to dream, right? Of course, if Twitter does decline or trades lower than say $30.00, then I would consider taking a closer look.

Twitter doesn’t make tons of revenues or profits yet. Just like Facebook, Twitter will need to monetize its growing list of tweeters, which pundits estimate to be in the 500 million range. Once the first day for the IPO is over and the frenzy begins to die down, Twitter will just then become another social media company with great potential, but needing to deliver numbers to investors.

Management at Twitter only have to look at stocks like Facebook and Groupon, Inc. (NASDAQ/GRPN) to understand that the company needs to pry money away from its tweeters in order to satisfy Wall Street. Facebook is doing it now with its surging mobile advertising business. For Twitter, the company will likely have to follow a similar approach like Facebook and focus on generating advertising money, which will determine its ultimate success. For now, I’d keep an eye on Twitter.