Category Archives: stocks

Startup Bubble Bursting, Valuations Due For Reset, Analyst Says

A bubble in valuations for private Internet companies is about to burst, according to Silicon Valley provocateur Trip Chowdhry, an analyst with Global Equities Research. “The startup bubble is bursting, the exit value of many startups may be one-fifth of the peak value,” Chowdhry said in a research report Monday. Some startups believed to have qualified as unicorns — meaning they have valuations above $1 billion — will lose that status, he said. IBM ’s ( IBM ) acquisition on March 31 of Bluewolf Group, a provider of cloud consulting and implementation services, could be a benchmark, Chowdhry said. Bluewolf was rumored to be valued at more than $1 billion a year ago, but was likely purchased for about $200 million, he said. IBM didn’t disclose financial details of that acquisition, indicating IBM considers the deal immaterial to its financials, where it almost certainly would give details of any $1 billion acquisition. At $200 million, the acquisition would be just one-fifth Bluewolf’s apparent peak value, says the analyst. Using the Bluewolf deal as a benchmark, enterprise cloud company Nutanix would have a true value of $400 million, not $2 billion as currently believed, the analyst says. Cloud-based software firm Cloudera is probably worth $900 million, not $4.5 billion as venture finance rounds have valued it, Chowdhry said. If other unicorns are revalued at one-fifth their peak valuation, file-hosting service Dropbox and visual bookmarking tool Pinterest are each worth $2.2 billion, not their reported $11 billion. By a similar measure, big data analysis firm Palantir would be worth $4 billion (not $20 billion), accommodations rental firm Airbnb would be worth $5.1 billion (not $25.5 billion), and ride-hailing service Uber Technologies would be worth $12 billion (not $60 billion), Chowdhry said. Chowdhry isn’t alone in calling a bubble in valuations of startups. The Wall Street Journal reported this month that venture capitalists are seeing signs of a bubble getting ready to pop.

Twitter Looks At New Ways To Make Tweets More Compelling

Twitter ( TWTR ) will soon stop counting photos and links in its 140-character limit for tweets, a change that could happen in the next two weeks, a news report says. As reported by Bloomberg , citing a person familiar with the matter who asked not to be named, the idea is to give users more flexibility on the site. It’s one of several steps being pondered by Twitter CEO Jack Dorsey as he looks for ways to rejuvenate the company, which is struggling to recharge user growth and to gain online ad sales vs. leaders Facebook ( FB ) and Alphabet’s Google ( GOOGL ). Reports surfaced in January that Twitter was looking to allow tweets longer than the traditional 140 character limit, perhaps to as many as 10,000 characters. Many core Twitter users complained that such a move would turn the short-messaging service into a Facebook clone. The photo/link tweak offers a way to increase the effective character count without changing Twitter’s character. According to Bloomberg, executives have spent the last few months emphasizing how Twitter is a destination for live events and discussion. Removing the character requirement for links and photos might encourage users to add more media to their posts. Twitter stock rose 1.4% in the stock market today , to 14.29. Shares touched an all-time low of 13.90 on May 3 and are down 38% this year. After the market close, Twitter announced that Debra Lee, Chairman and Chief Executive Officer of BET Networks, will join its board of directors. Twitter has been criticized for its lack of diversity on its board.