Twitter Goes Public on the New York Stock Exchange
Posted on November 8, 2013
When the markets opened on Thursday morning (11/7/2013), Twitter officially became a public company, trading on the New York Stock Exchange under the ticker symbol TWTR. IPO shares were priced at $26, above the expected initial opening offer of $23 to $25, and trading opened at $45.10 per share. After a day of trading, Twitter peaked over $50 and then closed at $44.90 per share, up 73% from its IPO price but slightly below its opening trading price. More than 57 million shares of Twitter exchanged hands on Thursday, making it the day's most actively traded stock. Interestingly, Facebook was the day's second-most traded stock, with 41 million shares changing hands.
The $26 IPO price valued Twitter at $18.34 billion, making it the second largest Internet IPO by an American company and the third-largest U.S. IPO this year. By mid-afternoon, Twitter's market equity had risen to $25.4 billion. That puts Twitter's market valuation on par with LinkedIn, the older social network that caters primarily to the business community.
Enormous trading volume and buzz fuelled Twitter's share price increase. And while Twitter has yet to turn a profit - the company lost $133.9 million in the first nine months of 2013 – analysts say that these early loses will ultimately make it easier for Twitter to meet investor expectations. Other analysts, such as Brian Wieser of Pivotal Research, an independent research firm, criticized Twitter's high opening price, arguing that anything in the high 30s was simply "too expensive". In a note to clients on Thursday, Wieser argued that in order to justify Twitter's $45 share price, the company would need to post $6 billion in annual revenue; current projections are about one-tenth that level.
Twitter co-founder Evan Williams, who owns the largest stake in the company, reaped the greatest financial gain with Twitter's launch. Williams' share in the company is expected to be close to $1 billion; if the stock price doubles, Twitter co-founder Jack Dorsey would join Williams in the billionaires club.
Twitter Avoids Facebook's IPO Debacle
While regular investors can snag shares of Twitter by working with a brokerage firm, some financial analysts initially cautioned investors to wait, remembering Facebook's May 2012 IPO debacle. Twitter, however, worked hard to be sure its IPO avoided the problems that plagued Facebook. Twitter chose to buck the long-held Silicon Valley tech tradition of listing on Nasdaq and instead choose the New York Stock Exchange. Additionally, Twitter insiders did not sell their stock like Facebook insiders did. Twitter is keeping all the money raised through its IPO to use for general corporate purposes and capital expenditures. With Facebook, half the money raised during its IPO went straight to the pockets of early shareholders, including hedge funds and venture capitalists.
As the lead underwriter for the Twitter IPO, Goldman Sachs worked hard to keep as much of the offering as possible out of the hands of retail investors and hedge funds that like to short stocks. Before the opening, traders aimed to zero in on Twitter's opening price and reduce the price volatility associated with Facebook's first day of trading.
Prior to the Twitter IPO, previous Silicon Valley tech stock offerings, including Facebook, used Morgan Stanley. Last year, Morgan Stanley and Facebook both came under fire for their handling of Facebook's stock prior to the initial IPO. Nasdaq was also criticized for a day-of computer glitches that froze trading for 30 minutes, causing confusion amongst traders. Nasdaq ended up paying $10 million in fees to the Securities & Exchanges Commission and millions more to brokers who lost money due to the glitch. In contrast, Twitter's IPO on the New York Stock Exchange went smoothly with no computer glitches. Twitter's decision to open on NYSE rather than Nasdaq also reflects Nasdaq's reduced clout in the tech world.
The biggest difference between Facebook and Twitter's IPO was symbolic. While Facebook CEO and founder Mark Zuckerburg chose to stay in Menlo Park and open the day's trading from there, the entire Twitter team took to the New York Stock Exchange's floor. Ringing the opening bell in the team's place was an eclectic collection of Twitter users: the actor Patrick Stewart, a child who opened a lemonade stand to raise money for cancer, and the Boston Police Department's social media manager.
By raising billions and pulling off a smooth first day of trading, Twitter's team gained a small victory. But the company still must prove that there's real substance behind its valuation - and not all hype.
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