Last week��s IPO of social gaming company Zynga (NASDAQ:ZNGA) certainly was a disappointment — at least for public investors. The stock broke its offering price by 5% and is down another 4% in Monday trading. This is not an isolated case. Other hot social companies, such as Pandora (NYSE:P) and LinkedIn (NYSE:LNKD), also have seen large drops since their IPOs.
But these flops don’t seem to matter to big-time private investors. Just look at Prince Alwaleed bin Talal (part of the Saudi royal family), who just agreed to invest $300 million in Twitter.
This type of investment really is chump change for Alwaleed, who, according to Forbes, is worth almost $20 billion. Prince Alwaleed is known as a long-term investor who focuses on large global brands, like News Corp. (NASDAQ:NWSA) — and even has a long-standing business relationshipwith CEO Rupert Murdoch. He also likes tech plays, as evidenced by investments like Amazon.com (NASDAQ:AMZN), eBay (NASDAQ:EBAY) and Apple (NASDAQ:AAPL).
No doubt, Twitter has a tremendous global brand and has become a force in politics (especially in the Middle East). At the same time, it is a key platform for social media marketing, with more than 100 million active users.
Despite all this, Twitter has been a mediocre revenue generator — the buzz is that revenues are around $140 million to $150 million this year. But Prince Alwaleed still was willing to invest at a whopping $10 billion valuation. That’s $2 billion more than Zynga, which is profitable and is expected to generate more than $1 billion in revenues for 2011.
Interestingly enough, the! valuati on of Twitter was $8 billion in August, when the company raised a hefty $800 million. All in all, Twitter has privately raised more capital than Zynga has from its IPO!
With such a huge slug of cash, Twitter really has no incentive to go public anytime soon. Like Facebook, the company is likely to continue focusing on building its user base and finding revenue opportunities. And in light of 2011′s social IPOs, it��s probably a good idea for Twitter to hold off, anyway.
Tom Taulli runs the InvestorPlace blog ��IPOPlaybook,�� a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of ��All About Short Selling�� and ��All About Commodities.�� Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.
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