The hottest IPO of 2013 hit the market today, and Twitter (NYSE: TWTR) stock lived up to its hype... (today, anyway).
Shares of Twitter opened at $45 a share, 73% above its initial public offering price. Within minutes, shares surged another $5 to $50.08 a share, up nearly 90%.
TWTR ended the day at $44.94.
Shares began trading on the New York Stock Exchange around 10:50 a.m. Thursday under the symbol TWTR. Thirty-eight million shares changed hands within 10 minutes. Unlike Facebook Inc.'s (Nasdaq: FB) IPO fiasco, Twitter's debut went off without a hitch.
The San Francisco-based micro-blogging messaging service gave users - instead of executives - the thrill of ringing the NYSE's opening bell. The selected users included Sir Patrick Stewart, Captain Jean Luc Picard in "Star Trek: The Next Generation," Vivienne Harr, a 9-year-old girl who ran a lemonade stand for a year to raise money to end child slavery, and Cheryl Fiandaca of the Boston Police Department.
Late Wednesday, via a company tweet, Twitter service priced its initial public offering at $26 a share. That was above the $23 to $25 range set earlier in the week, and up from the initial $17 to $20 range.
The offering was small (Twitter sold less than 1% of the company), but interest was huge. Indeed, the IPO was 30 times oversubscribed.
The $26 IPO price valued Twitter at a lofty $18 billion. That's more than a number of S&P 500 companies. To put in perspective, it's more than Macy's Inc. (NYSE: M), which has a market cap of $17 billion. It's more than Bed Bath & Beyond Inc. (NYSE: BBBY), valued around $16 billion. And, it's more than three times the size of Tiffany & Co (NYSE: TIF).
Twitter sold 70 million shares to the public, raising some $2.1 billion, making it the second largest Internet offering in the United States behind Facebook's $16 billion IPO last year and Google Inc.'s (Nasdaq: GOOG) 2004 1.6 billion IPO, according to Thomson Reuters.
Not bad for a company that has a long history of not being profitable...
What's benefiting the Twitter stock price is a fresh case of IPO fever.
Investing in TWTR the Latest Symptom of IPO Fever
This year, shares of companies that have gone public have gained an average of 50% from their IPO, reports CNN Money. That's double the return of the S&P, up roughly 24% year to date.
The Bloomberg IPO Index has risen 41% in 2013 and is beating the Standard & Poor's 500 Index by 18%. Both these figures are the highest for a full year since 2009, when the current bull run for stocks began.
Twitter has "the wind at its back, definitely," Justin Walters, co-founder and manager partner at Bespoke Investment Group LLC said in an interview Wednesday. "IPOS are healthy right now, and that's what you want to see."
The IPO indicator, a compilation of companies that have gone public within the past 12 months at a market value of more than $50 million, set records six times in the last three weeks. The most recent mark occurred Monday.
Twitter (NYSE: TWTR) Stock: Not a Good Bet
Don't let the first-day TWTR pop fool you; Twitter faces a number of hurdles going forward:
- A big hurdle for TWTR is making money. Last month, the company reported Q3 revenue that more than doubled to $168.6 million. However, net loss widened to $64.6 million from $21.6 million a year ago amid mushrooming costs.
- Costs are expected to rise as the company continues to boost its international presence. But expanding globally won't be easy. Analysts say the company could run into a number of regulatory and policy obstacles in overseas countries as it attempts to grow.
- Twitter's widely known intellectual property vulnerabilities could also force the company to spend steeply to grow its patent portfolio.
- User growth is slowing. Twitter currently has around 240 million users. That means it has been adding fewer than 4.5 million users a month in 2013. If it continues to grow at that rate, it would end the year around 260 million users. That means its user base would have grown by 30%, well below the 100% goal of Chief Executive Officer Dick Costolo.
Twitter - the largest public offering since Facebook Inc. went public on May 18, 2012 - is trading at some 50 times revenue.
Sure sounds like another tech bubble.
This is why Money Morning Chief Investment Strategist Keith Fitz-Gerald wrote earlier today that the Twitter IPO performance shows "reality is out the window."
He tells us who does get rich off of the Twitter IPO - and it's not going to be retail investors. Check out the full story of how Wall Street will be the only Twitter IPO winners.
Related Articles: