Twitter Could Help Investors Profit Long Before The IPO (TWTR)
Twitter is expected to go public in the not-too-distant future.
While some investors may be waiting for that moment to cash in, others may already have the opportunity to profit from Twitter -- by using its service as an investing tool.
Market Prophit, a new website from Wall Street veteran Igor Gonta, was conceived after Gonta discovered a hedge fund (Derwent Capital) that used Twitter to improve its investing strategy. He became very intrigued by this concept and began to realize that investing-related tweets (those with a dollar sign hashtag) could be quite useful to investors.
Gonta also realized that it was impossible for one person to read all of the individual tweets and understand what people are collectively saying, whether they are bullish or bearish, etc.
This gave him the idea to build a tool that would organize all of that info and bring it to one site.
"It is completely self-funded by me, which is painful," Gonta, the CEO of Market Prophit, told Benzinga with a laugh. "It's very painful, but I'm blessed to have been able to do it, because I believe in it. We're talking to investors right now, and we'll be talking in the future once we release our full product set."
Investors can currently sign up for the Market Prophit beta and view daily sentiment charts that reveal the bullish and bearish views that traders have for a particular stock. The charts are updated every minute and reset daily, but Gonta plans to add historical data so that users can see how sentiment has moved over time.
Market Prophit also wants to add blogs, Facebook (NASDAQ: FB) and other forms of social media. In time, the company plans to include an element of predictability that will rank how successful individuals are at predicting where the market will move next. Ranks will be based on the comments investors post on social media sites.
Gonta has spoken with a number of hedge funds about Market Prophit and learned that their needs vary greatly. For example, long/short investors are "looking to get a pulse on the market," Gonta said. They want to be able to tap the info quickly, see what's buzzing, and know if one of their stocks is moving.
"One thing that will go a long way that I think is missing from my competitors is what we're putting out in phase two -- the ranking of the bloggers," said Gonta. "You can imagine a blogger who sits there and constantly pumps and dumps is going to always be saying, 'Buy, buy, buy.' Because those guys are typically long. Our algorithm picks up on that.
"You can imagine, because we measure predictability, our ranking for people like that would actually be a zero. Meaning they're not good or bad -- you should just ignore the message."
Traders may be free to say whatever they want on Twitter and other social media sites, but that won't fly with Market Prophit.
"You can't just tweet garbage," Gonta added. "We'll catch you because the market is going to decide -- not how many followers you have, not how popular you are, not if you're on television, not how many readers read your blog or newsletter -- but were you right? Are you putting out good stock tips? Are they timely? Are they predictive? Do they make money?"
Gonta believes that this will keep a service like Market Prophit from being overrun with nasty information that is designed to skew stocks in one particular direction.
Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.
Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ
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