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.
Twitter Raises 1.82 Billion Pricing IPO Above Price Range
Twitter Set for Volatile Debut After IPO Raises at Least 1.8 Billion
- CNN Money:
Twitter Sets IPO Price at $26 a Share