Call it a tale of two sales. Last week saw the publication of the stock-market prospectus for a 378-year-old national institution, known around the world for its delivery of messages. This week saw the start of the public offering of a company that didn't even exist in 2005, yet which is already famous for publishing short, sometimes sharp, memos. Which is which? Send your answers on a postcard – or a tweet.
The upcoming flotations of the Royal Mail and Twitter offer some fascinating contrasts – and one key, troubling similarity. The differences are easy to spot. Start with market value. Shares of Twitter will go on sale in November at a price that makes the company worth around $11bn (£6.8bn). In its punting of the Royal Mail, the government reckons the company is worth only between £2bn and £3bn. Looking at those figures, you might assume that Twitter has some kind of licence to print money, while Britain's postal network is a financial basketcase. Not so. Ever since George Osborne relieved the Mail of its pensions liabilities and dumped them on the taxpayer (all the better to execute a firesale), the company has been comfortably in the black. At the last count, operating profits were £403m, more than double on the previous year. And Twitter? The truth comes out early in its S-1 filing: "We have incurred significant operating losses in the past and we may not be able to achieve or subsequently maintain profitability." In other words: we haven't yet made a cent – indeed, we might never make a cent.
But Twitter isn't offering tempted investors a steady revenue stream: it's selling them a stake in the future. The Twitter army is swelling fast – in the three months to the end of June, it had 218 million monthly users, up from 151 million over the same period in 2012. The company wants to bombard users with ads. The Mail on the other hand is commonly held to be managing commercial decline: the bulk of the post that flops onto the average doormat is either junkmail or mail-order treats – actual, personal letters are an increasingly rare beast. That said, at current valuations Twitter reckons its users are worth something like $50-$75 each.
Even if it keeps growing its users – very likely, given the booming smartphone market – and they don't get put off by the number of ads, it's still questionable whether Twitter is worth the money. The Mail on the other hand already has a revenue stream and a portfolio of properties. The troubling question for both companies is what they hope to get out of flotation. Apart from allowing early investors to cash out, it's unlikely Twitter's new owners will tolerate its spending on research and development. As for the Royal Mail, going private is unlikely to improve conditions for workers or customers.
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