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October 07, 2021

Twitter-hungry stock buyers jump the gun

Oops. That's probably what some investors thought when they accidentally purchased stock in TWTRQ, Tweeter Home Entertainment Group, an electronics chain that liquidated in 2008.

With investors buzzing about the latest news on the upcoming Twitter IPO, some silly traders helped the defunct company's stock rise to a value of about 1,400 per cent. On Thursday, the stock closed at one cent, but on Friday it rose to as much as 15 cents. The OTC finally head to step in and halted trading on the stock at 12:42 p.m. on Friday. This is after details about Twitter's financial situation was revealed through a prospectus filed with the Securities and Exchange Commission.

Unfortunately, investors were over eager and it turns out that the Q behind the stock means that the company is bankrupt, but can continue to be traded, according to CNN.

News about the social media company will only continue to heat up as the IPO date draws closer. Twitter hopes to raise $1 billion and it'll likely debut as early as mid-to-late November under the ticker symbol TWTR. It's predicted that the company could be valued at between $12 billion and $20 billion when it debuts.

Unfortunately, Twitter already faces one major hurdle in its IPO, which is the memory of Facebook's lacklustre debut in 2012. Facebook's shares skyrocketed and dropped on the first day and continued to decline throughout the year. Its stocks didn't reach close to the IPO price until after about a year. Investors were also burned by Zynga and Groupon IPOs that saw their stock prices plunge after their debut and remain below the IPO stock price.

While Twitter has the advantage of brand recognition, there's research showing that hot, new IPOs don't typically perform well afterwards. Before Groupon's IPO, Bloomberg Businessweek looked at 25 popular IPOs and saw that many of the company's stock prices fell below their debuts.

This doesn't even account for whether Twitter will bring in a profit after a net loss in the first half of the year.

Will you invest in the upcoming Twitter IPO?

Josephine Lim, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...