The shares of social media companies offer attractive price growth potential, but also harbor considerable risks.
Within just a few years, social media offerings have revolutionized communication in many areas of life, both in B2B applications and in interactions between private individuals. Companies offering social media services often start their business activities on a small scale in the legal form of sole proprietorships or partnerships. As soon as their business idea proves successful on a large scale, their capital requirements increase significantly.
For this reason, they then often convert to a stock corporation and go public. On this occasion, the founders usually sell a large part of their business shares in order to make a profit.
For private investors, too, subscribing to new issues of social media shares or acquiring shares in already established groups offers attractive profit opportunities. However, the development of the major social media stock companies also shows that this commitment is associated with some risks of loss.
Facebook - a unique success story
Although several new social media companies have entered the market in recent years, Facebook is still considered the leading provider. The US company now has well over one and a half billion active users worldwide. Mark Zuckerberg founded Facebook in 2004, and the company went public on the NASDAQ in New York on May 18, 2012. The issue price was $38. However, the Facebook share initially disappointed the hopes placed in it. In the months that followed, it lost considerable value, with the share price falling to just 19 dollars in August 2012. After a pronounced sideways movement in the first half of 2013, Facebook's share price then developed steeply upwards. On November 1, 2017, the share price reached an all-time high of $182.66 and continues to hover around this level.
Twitter - changeable share price development
The microblogging service provider Twitter was founded in San Francisco in 2006. The IPO took place in November 2013, the issue price was 26 dollars. Those who sold the new issue on the same day were able to achieve profits of up to 90 percent. On the evening of the first trading day, the shares were still quoted at just under 45 dollars after a minor setback. After initial euphoria, the Twitter share proved to be extremely volatile, managing to reach prices of over 50 dollars in the first few years. However, due to persistent losses and stagnating user numbers, the Twitter share has been going downhill since 2015. At the end of February 2018, it was trading at around 33 USD.
Social media stocks - unpredictable and risky
The performance of social media stocks so far shows how risky investing with exness zar in the industry can be: While Facebook has been able to prove itself so far despite a difficult start on the stock market, the euphoria surrounding Twitter was rather short-lived. Anyone considering an investment in social media should therefore know the market well and keep up to date with current developments. Facebook can serve as a role model here: With the purchase of WhatsApp and Instagram as well as the investments in the field of virtual reality, the company is basing its success on several pillars and ensuring innovation. Mark Zuckerberg is considered a visionary in the industry and pursues a long-term strategy with his company. As a result, the company has been able to show continuous growth in sales, profits and users in the past.
Social media stocks often exhibit surprising developments, which can take the form of both large price gains and significant losses.
If you decide to invest in this stock, you should take advantage of favorable buying and selling opportunities to realize profits.