Twitter made its highly anticipated Wall Street debut at $45.10 a share, sending the company's value soaring above expectations.
The social media giant opened itself for sale to investors Thursday in an initial public offering that was expected to raise nearly $2 billion and will test its ability to leverage its 232 million users into profits. The stock, which began trading on the New York Stock Exchange at more than 70 percent over the $26 IPO price, hit a high of $50.09 and and ended the day at $44.90. The current trading price puts the company's total value at roughly $30 billion, CNBC reported.
"We are investing for the long term," Twitter CEO Dick Costolo told CNBC. "We think this is a long-term company — a company for which there is a fantastic use case for every person on the planet."
The market's opening bell was rung at 9:30 a.m. not by Twitter's founders or executives but by three Twitter users: Actor Patrick Stewart, a Boston police officer and 9-year-old Vivienne Harr, who set up a lemonade stand for a year to fight child slavery. In a tweet, the Stock Exchange said Twitter gave those three the honor because the company owes it success to Twitter users like them.
NYSE CEO Duncan Niederauer said he was proud of how the Twitter IPO unfolded. He said it was part of a broader effort to lure tech firms over from the NASDAQ, an effort that involves building relationships in Silicon Valley long before companies contemplate an IPO and that would culminate with glitch-free experiences like Thursday's.
"We've been partners with Twitter for two or three years now," he said.
Trading under the symbol TWTR, the company set an IPO price of $26 a share, which would have valued it at $18 billion based on outstanding stock, options and restricted stock expected to be available after the IPO, according to The Associated Press. That number surged Thursday as the company joined the world’s biggest publicly traded Internet properties, a stage dominated by Apple, Google and Facebook.
— Twitter (@twitter) November 7, 2013
Next to them, Twitter can seem like a skinny adolescent. It suffered through frequent management changes and boardroom clashes before turning to an “adult” CEO for guidance and stability. Revenue is exploding, thanks in part to the development of the “promoted tweet” and marketing partnerships with the television industry. But losses are mounting as well, and its growth in Twitter users has slowed significantly.
Still, Twitter arguably could not have picked a better time to go public. The bullish stock market is fielding a bumper crop of IPOs, and on Wednesday the Dow Jones industrial average closed at an all-time high.
Twitter's IPO’s success, and its stock’s long-term performance, will help determine whether the company can become, in the words of Costolo, “the pulse of the planet” without losing its focus.
Twitter has tremendous power and reach -– it was instrumental in the Arab Spring uprisings and is, for millions of news consumers, the first digital draft of history — but observers say it runs the risk of being drowned by the deluge of 500 million or so messages it handles on a daily basis.
“It’s fair to say that people have a harder time defining the appeal and value of Twitter relative to other social networks,” said Scott Kessler, an analyst at S&P Capital IQ. “Facebook is a social network for friends. LinkedIn is a social network for business contacts. But people have a harder time describing Twitter. They need to do a better job communicating what they are, what they offer and how to get value from the platform.”
With 70 million shares available on the market, the central concern among investors is whether Twitter can become profitable and, if so, how long that will take.
Twitter took in $317 million in revenues in 2012 but lost about $80 million. Revenues soared this year, to $422 million, but losses did too, to $134 million.
Facebook, by comparison, reported an annual profit of $1 billion before its May 2012 IPO. Its 1.2 billion users dwarf Twitter’s.
But Facebook’s IPO, listed on Nasdaq, is generally considered a failure. It overstated its initial asking price, was beset by trading delays and other glitches and ended the day up just 23 cents higher than its $38 IPO price.
Facebook’s stock price has since climbed by about 28 percent.
Many analysts thought the company deliberately listed its initial price for institutional investors on the low side. Twitter started at a projected price range of $17 to $20 a share, then rose to a range of $23 to $25 a share before settling on $26 after markets closed Wednesday.
There was no outward gloating, but as NYSE officials pointed out how smoothly the process went, the May 2012 Facebook debacle was an obvious point of reference. Patrick Murphy, executive floor governor for Barclay's' which handled the price setting, said there had been "zero hiccups."
Scott Cutler, executive vice president of global listings for the NYSE, said that officials took a long time to set the opening price to ensure it properly reflected supply and demand on the open market, and to avoid volatility. It seemed to work: At noon, the stock still hovered just over $45.
"This one took a little longer than expected, but it's part of the process," Cutler said.
Jonathan Corpina, a senior managing partner at Meridian Equity Partners, said that, besides the media presence that made the trading floor a bit more frenzied, the Twitter IPO wasn't much different than the others.
"The goal is to open the stock as the right price, where buyers and sellers are comfortable," he said. "There's a benefit to taking your time and go slow to make sure you get it right."
The company has said it will channel the proceeds of the IPO into operating expenses and capital spending. It is also expected to fund the acquisition of other companies.
Twitter had hoped heading into the day for what is known in the business as a first-day “pop," in which the stock price jumps during the early hours of trading.
In the minutes before the market's opening, there was a palpable sense of excitement on the stock exchange floor, which on normal days is relatively quiet and uncrowded. Traders gave each other high fives and slugged coffee. They expressed confidence that the IPO would go off without hitches that characterized the Facebook IPO.
"We've learned from their mistakes," one said.
One trader, anticipating the frenzy that will accompanying the IPO, said he would not be using Twitter this morning.
"I gotta trade, I can't tweet," he said. "I don't get paid to tweet."
When the initial clamor over the IPO passes, Kessler said, investors and analysts will look at Twitter’s operations for its handling of three key goals: sharpening its brand definition, moving closer to profitability and generating more revenue through new advertising products, mobile platforms and international markets.
“As much excitement as there has been around the company and the IPO, they have to demonstrate that they can generate profits sooner rather than later,” Kessler said.
Twitter has been vague about its advertising plans and when it expects to get into the black.
Kessler thinks it won’t happen until 2015. Anything later, he said, could be seen by investors as a disappointment.
— (NYX) NYSE Euronext (@NYSEEuronext) November 7, 2013