Twitter priced its initial public offering Wednesday night at $26 a share. The stock debuted at 10:49 a.m. ET on Thursday on the New York Stock Exchange, and the first trade came in at $45.10 a share.
At a price near $45 a share, Twitter (TWTR) is valued at $24.6 billion.
Twitter's pop is similar to that of LinkedIn (LNKD), which more than doubled in its first day on the stock market. But it was Facebook's messy debut on the Nasdaq last year that had some individual investors worried ahead of Twitter's IPO. Luckily for Twitter, its offering went smoothly.
"We tried to have a very clean process [for the IPO] ... the team that worked on it inside the company was very methodical," Twitter CEO Dick Costolo said on CNBC earlier in the morning.
"Phew!" tweeted Anthony Noto, Twitter's top banker at Goldman Sachs (GS, Fortune 500) (which led the underwriting of the IPO) after trade started.
Twitter was the most actively traded stock in the U.S. Thursday. More than 70 million shares exchanged hands in the first hour of trading.
I'm not too big on Social Media stocks, any of them.
First, there's too much risk in "advertising". The CPM's are likely to fall unless there is significant work done to clear out the spammers and fake followers. The latter of which will cause huge distortions in determining proper CPM's revenue. Further, I'm bearish on the U.S. economy and by extension, the U.S. consumer, thus the cost of running ads will not generate as much revenue in turn for the businesses themselves.
That being said, I am not at all opposed or even bearish on the idea the transition of advertising revenue coming from online ads rather than the traditional TV and print ads. However, expectations of the revenues as the result of this phenomenon are at this point simply exaggerated.
The easy money policy we have the United States has made it very attractive for companies to go public. Using the cheap money in the equity market instead of turning a real profit as a way to outlast the recession is a game that will eventually come to an end.
Also, the economics of Twitter reveal a bit of problem (From the story linked above)
Twitter isn't yet profitable: Twitter raised about $1.8 billion through the sale of 70 million shares Wednesday evening at $26 a share. The offering's underwriters also have the option to buy another 10.5 million shares from Twitter. By comparison, Facebook (FB, Fortune 500) raised $16 billion in its IPO.
But unlike Facebook, Twitter has yet to turn a profit. The company pulled in $317 million in sales in 2012, but ended up reporting a loss of $79.4 million.
For the first nine months of 2013, Twitter's revenue was $422 million. But losses also increased, to $134 million.
$317 million generated a loss of $79.4 million.
$422 million generated a loss of $134 million.
Meaning that while revenue grew at about 33%, the losses grew by an astounding, 68.76%! Twitter's not a warehouse or retail company. Expansion does not mean hiring $8 an hour employees. They require S.E.O. and other costly tech employees to grown their business. Additionally, they would have to gain huge economies of scale with their existing infrastructure and/or, expand their company in a much cheaper place than the Bay Area of Northern California. Perhaps this was discussed with the analyst at Goldman or others in the syndicate. Maybe this forward outlook is buried in a press release or a somewhere in the companies financials. I honestly don't know.
However, if you're a day trader, you might be able to profit off the myopia for a while. Hell, Yelp's still not profitable and look where that went. Timing is everything in this market.
Bottom line: TWTR:
As a trade: Sure, knock yourself out!
As a long term investment: I'd wait a while.
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