Twitter has raised its IPO price target to $23 to $25 per share, according to Businessweek, with the price set to go higher before the final offering. Assuming it is successful in going public, the social-media company could garner a market capitalization as high as $13.6 billion. Although investors are lining up to buy stock in the company, Twitter is currently unprofitable, raising questions of how it could possibly justify such a rich IPO.
Despite certain market indices like the Dow Jones approaching all-time highs, the Nasdaq index is still well off of its own high of over 5,000, which it reached at the peak of the dot-com boom in the year 2000. But it is well above its pre-recession high (excluding the bubble in 2000). Like other stock markets, this valuation stands in stark contrast with prevailing macroeconomic conditions; on the plus side, however, is the ongoing money printing of the Federal Reserve. The craze surrounding Twitter’s IPO despite its lack of profitability may simply point to the fact that investors, lacking any other options to gain returns on their money, are planning to ride the bubble until it pops. In the meantime, indications are that the bubble will continue inflating.
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