Twitter (TWTR) just filed its S-1 docs with the SEC in preparation for an IPO. But investors who aren’t too familiar with the company or with how an initial public offering works have apparently been so excited by the media blitz that they’ve bought stock as soon as possible.
Unfortunately, the fact that Twitter stock isn’t public yet means they’ve been buying the wrong stock.
Click to EnlargeCheck out the Performance of TWTR Inc., formerly known as Tweeter Home Entertainment. The stock gapped up as much as 15-fold today in what is almost certainly a case of mistaken identity.
You may remember Tweeter from the heyday of home theaters and car stereo systems, as big-box electronics retailers charged top dollar for high-end audio system installations … but just as Circuit City went belly up, so did Tweeter. The stock went bankrupt in 2008 and hasn’t traded for more than $1 a share since mid-2007.
But thanks to the buzz of the Twitter IPO and the serendipitous circumstance of having a name that matches the TWTR ticker symbol, the entertainment systems company formerly known as Tweeter has had a mighty good run.
This is a case study in stupidity, laziness or both.
A simple look at any metrics on Google Finance or Yahoo Finance would have tipped gullible investors off — just read the description, just look at the price history or just have a basic understanding that Twitter hasn’t had a public stock offering yet so the stock isn’t … you know … publicly available.
Shares subsequently fell back below a dime in midmorning trading, so apparently investors are figuring things out. But let that be a lesson to you — know what you’re buying before you buy it.
Related Reading on Twitter and TWTR Inc.
- Details on the Tweeter bankruptcy in 2008. (Costar.com)
- The REAL S-1 filing for the Twitter IPO … notice there’s no date for the offering yet. (SEC.gov)
- Tom Taulli on the Twitter IPO docs thus far. (InvestorPlace)
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at email@example.com or follow him on Twitter via @JeffReevesIP.