Twitter Inc. IPO finally set off on the New York Stock Exchange, with its initial price marked at USD 26 and an opening price of USD 45.50. During the first few hours of trading, the shares rose to an intraday high of USD 50.09, and finally get closed at USD 44.90. As reported, at this price, the market cap of TWTR is just above $32 billion – larger than 337 of the companies that make up the S&P 500.
Twitter began with its IPO journey around September by filing it first in a confidential manner. The company looked forward to raise USD 1 Bn through this move, with the company being valued at around USD 16 Bn, based on the buying in the private market.
For long, the IPO remain overshadowed by the pitfalls that Facebook IPO faced while it goes public in may last year, along with investors worries of Twitter earning losses of USD 64.5 Mn in the last quarter. The recent polls conducted by AP- CNBC also warned investors of not buying Twitter IPO, with 49% of the active investors of view that Twitter IPO will not be a good investment to make.
But, against all odds, the Twitter IPO saw huge demand for its IPO shares before the final pricing, with investors asking for 30 times the 70 Mn shares it offers in the IPO. After the listing, the shares traded at about 22 times forecast 2014 sales, nearly double the multiple at social media rivals Facebook Inc (FB.O) and LinkedIn Corp (LNKD.N)
Clearly, the twitter fans which includes its user base of 230 Mn, trust this company to turn into profit in the coming years, with marketers beliefs that the company has enormous opportunities ahead in the field of global advertising.
“When people use Twitter they are following certain people, they’re searching for specific information. There are powerful marketing signals that are almost Google-esque, something that Facebook doesn’t really have”, said Mark Mahaney, an analyst at RBC Capital Markets.
However, the financial analysts seem to have a mixed reaction over the pricing of Twitter IPO, as for some it is too expensive, while few are of the view that it has been priced too low.
“I’m sure the company didn’t want a Facebook debacle, I get that, but I think they were overly cautious and it cost them some money”, said Ken Polcari, director of the NYSE floor division at O’Neil Securities.
In view of Pivotal Research’s Brian Wieser, with a price that pushes into the high 30s and beyond, Twitter is simply too expensive. “One way to justify a $45 price in our model would involve presuming that Twitter could generate more than $6bn in annual revenue by 2018. However, we think that would seem overly optimistic”, he added.
Also, the fund managers believe that the share prices will went down and are looking forward to buy at a target price of USD 30-40.
“We have a target of $40 and we won’t buy more as long as it is trading above that,” said Mark Hawtin, portfolio manager of the GAM Star Technology Strategy.
Well, putting aside all debates about future, the Twitter founders are currently rejoicing the grand success of a much anticipated IPO of this year. As per Reuters, at current valuations, the stakes owned by Twitter co-founders Evan Williams and Jack Dorsey would be worth around $2.7 billion and $1.1 billion, respectively. Chief Executive Dick Costolo, who invested $25,000 in the company in 2007, holds a 1.4 percent stake worth about $360 million.
Also, as per a Forbes report, with the listing of Twitter, the market went down slightly for the fellow tech companies viz. Facebook off 3%, LinkedIn down 4%, Google 1.5% lower and the Nasdaq falling almost 2%.
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