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The Twitter stock IPO is going to happen – it's no longer a question of if, but of when. The company is the latest social media concern to go public, and investors and commentators alike are looking forward to the festivities.
It remains to be seen whether or not Nasdaq can avoid the issues that it ran into with Facebook Inc. (Nasdaq: FB). That IPO was one of the biggest in history. The company had a market cap of $104 billion, unprecedented for an IPO.
But the offering was beset by… nearly everything that could go wrong with an IPO. The exchange suffered a computer malfunction that misplaced somewhere between $10 and $20 million worth of share orders. There were allegations that underwriter Morgan Stanley (NYSE: MS) offered too many shares at too high a price.
Although it's impossible to tell for sure, as the JOBS act allows firms with less than $1 billion in annual revenue to keep IPO details confidential, the smart money says that Twitter will open lower – much lower – than Facebook did, in order to allow the markets to regulate themselves and for shares to appreciate according to market forces. It remains to be seen whether or not this is a wise move, but it's undeniably more level-headed.
Who Wins the Most from Twitter's Stock IPO
However the Twitter stock IPO fares, the biggest winners will be the early investors, the angel investors, and the people who started the undertaking. The New York Timestells the story of Twitter founder Evan Williams passing the hat around among some of Silicon Valley's many financiers as he was starting out. He lit upon Dick Costolo, who agreed to put up $25,000.
Six years later, Dick Costolo is the chief executive officer (CEO) of Twitter. The New York Timesestimates Costolo's $25,000 stake to be worth more than $10 million now, not including anything he's entitled to as part of his CEO compensation. It's a near certainty that Evan Williams himself is set to be America's newest billionaire.
The underwriters usually do well, too. In Twitter's case, Goldman Sachs is taking the lions' share of the underwriting. According to Bloomberg, this will put Goldman on track to be the top underwriter in the United States for the first time since 2009. JPMorgan Chase & Co (NYSE: JPM), Morgan Stanley, and Deutsche Bank AG (USA) (NYSE: DB) will all take on underwriting duties – and profits – as well.
After all these categories of people get their cut, it's next to impossible for individual retail investors to pick up the very best IPO shares. The system works against smaller investors, by design if not intention.
But maybe that's not a bad thing.