{"id":47282,"date":"2014-02-10T05:51:41","date_gmt":"2014-02-10T10:51:41","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=47282"},"modified":"2014-02-10T05:51:42","modified_gmt":"2014-02-10T10:51:42","slug":"controversial-stock-gets-a-stay-of-execution","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2014\/02\/10\/controversial-stock-gets-a-stay-of-execution\/","title":{"rendered":"Controversial Stock Gets a \u201cStay of Execution\u201d"},"content":{"rendered":"

By WallStreetDaily.com<\/u><\/a> \"Controversial<\/p>\n

Rotten to the core…<\/em><\/p>\n

That pretty much sums up my take on the glut of social media-based companies that went public in the last few years.<\/p>\n

Mind you, it’s entirely because they came to market at obscene valuations. But apparently everyday investors are a stubborn bunch\u2026<\/p>\n

Instead of simply steering clear, they insist on learning the perils of inflated, overhyped IPOs the hard (and costly) way.<\/p>\n

Consider Exhibit A: Facebook<\/strong> (FB<\/a>).<\/p>\n

From its opening day peak on May 18, 2012 to its all-time low only 106 days later, the stock flopped 61%.<\/p>\n

Shares really started to hit the skids on the heels of the company’s first earnings report on July 26, 2012. They dropped 17% in a single day, erasing billions of dollars in market capitalization in the blink of an eye.<\/p>\n

Fast-forward to today, and the same fate has stricken another social media darling, Twitter<\/strong> (TWTR<\/a>).<\/p>\n

The day after its first earnings report as a public company last week, shares tanked 24%, wiping out $8.7 billion in market value.<\/p>\n

While I expect the stock to keep getting gutted, the company is not a total loss.<\/p>\n

Quite the opposite, in fact. The company is tremendously valuable, just not in the way most investors think. Let me explain\u2026<\/p>\n

Miss Cleo Can’t Touch This<\/strong><\/b><\/p>\n

While I’ve always been hyper critical of social media valuations, I’ve never questioned the utility of the platforms. For good reason, too.<\/p>\n

It turns out that social media networks, unlike psychics, possess extraordinary predictive abilities. A growing body of evidence, from University College London to Harvard, confirms it, too.<\/p>\n

Indeed, as we communicate with friends and loved ones over social media, we also unknowingly reveal our real-world behaviors and intentions.<\/p>\n

By mining this data, companies can glean invaluable information\u2026<\/p>\n

Like identifying news stories destined to erupt into full-blown national crises. To this end, CNN recently revealed that it’s preparing to unveil a new tool, developed in partnership with Twitter and Dataminr, to help journalists identify breaking news stories first.<\/p>\n

More significantly to us, social media data can be mined to determine the future direction of stock prices. Seriously.<\/p>\n