Wall Street showed it is sweet on Tweets, sending the share price of Twitter soaring to nearly $50 in the micro-blogging site's first day of trading.
The San Francisco-based tech site, which has become a go-to source for rapidly breaking news, pithy commentary and ill-advised remarks that can never be taken back, went public Thursday. The company had pegged its initial public offering price – in a tweet, naturally - at $26 per share, which would make the company worth about 18 billion. That figure was well above earlier estimates and driven by a deafening buzz not seen since Facebook stock hit the open market. Some investors think the sky is the limit for the latest web mega-property to go public.
“Just as Google, Amazon and Facebook have become Internet Utilities, so too may Twitter,” Mark Mahaney, an analyst at Royal Bank of Canada’s RBC Capital Market, wrote in an upbeat research note on Wednesday. “We think that current valuation does not fully reflect Twitter’s enormous opportunity.”
“Twitter is a good company but nothing like these ridiculous predictions we’re hearing about… These analysts are smoking something.”
- Vivek Wadhwa, Stanford University
IPOs are typically expected to drive stock prices higher that the initial target on the first day of trading, and the buzz surrounding Twitter prompted major oversubscription of shares. The opening price of $45.10 makes the company worth more than $30 billion. In early trading, it edged up to $48.25.
But if Facebook is to be a guide, the stock story of Twitter, which will trade on the New York Stock Exchange under the symbol TWTR, could take some twists and turns. Facebook’s May, 2012, initial public offering raised $18.4 billion, which made it the second-biggest U.S. IPO ever behind Visa’s 2008 offering of $19.65 billion.
Facebook targeted its IPO price at $38 per share, but frenzied initial trading saw it rise to $45 before closing the day just 23 cents above the target price. In subsequent weeks, it fell to as low as $20 per share, but it now hovers near the lofty $50 mark.
The decision to trade on the New York Stock Exchange instead of the tech-heavy Nasdaq was seen as a coup for the older exchange. Facebook's debut on the Nasdaq was marred by computer glitches, which may have prompted Twitter's decision.
Some experts are urging caution, and noting that despite all the eyeballs that view Twitter, the company still loses money. The company has lost $133.85 million through the first three-quarters of 2013, following a 2012 that saw the company $71 million in the red.
“We are back at the dotcom days,” Vivek Wadhwa, a fellow at Stanford University, told Fox Business. “Twitter is a good company but nothing like these ridiculous predictions we’re hearing about… These analysts are smoking something.”
But Twitter enthusiasts note the company generated $317 million in revenue in 2012, up nearly 200 percent from the year. Revenue growth is projected at 101 percent for this year, and some investors believe the company can get its margins into the black.
The company is starting off with an offering of 70 million shares – considered a relatively small allotment. The sale will leave the company with more than 500 million shares of common stock.
Reuters and Fox Business contributed to this report