Investment firm advises caution over what it terms the 'social bubble'.
Private investment bank QuantumWave Capital has raised concerns over reports that social networking site Twitter could be planning to go public next year.
Research and advisory firm Greencrest said on 7 January it expects the social networking site to undergo an IPO in 2014, and claims it is now worth around $11 billion (£6.58 billion).
However, QuantumWave’s CEO Robert Marcus has questioned the motivation behind the rumoured IPO, and cautions that the social media "bubble" could be about to burst.
Everyone agrees Twitter has value as a service, but the bigger question is does it have value as a public company
“When you look back at the history of the world, whether it is tulips in 1637, English trading firms in 1720, the internet in 2000 or real estate in the mid 2000s, we have a history of building up bubbles...only to go through a terrific loss of confidence when they inevitably burst,” Marcus told IT Pro.
“I think the same is true of social now. Facebook [which is widely considered to have been over valued] is a prime example of what not to do around an IPO,” he added.
Marcus said companies normally go public when they need cash and are unable to raise it through venture capitalists or other means.
Facebook continued to raise money through such means in the lead up to its IPO, leaving Marcus to question why it went public in the first place.
The same lessons could apply to Twitter, he argued, which he claims is yet to demonstrate a viable model for continued revenue generation and growth.
“I think everyone agrees Twitter has value [as a service], but the bigger question is does it have value in terms of a public company," he said.
"Can it generate revenue and significant returns for investors – and I think that remains to be seen."
In September, Twitter CEO Dick Costolo told CNBC that the company would never go public.
So far, the company has remained silent over this latest set of IPO rumours.