Twitter, Inc. (NYSE: TWTR) enjoyed a successful initial public offering (IPO) today, as the company’s shares rose by 73 percent that had boosted its market value to about $25 billion in just a few hours.
Twitter’s amazing success in its IPO has been, for many, redolent of the so-called “dot-com” explosion, where Internet-based startup companies were at their most profitable. However, some experts believe that there may have been too much froth in today’s IPO, excessive investor appetite that may have been for naught after all. At the close of today’s trading, Twitter shares closed at $44.90 per share and hit a high of $50 within the day, or close to twice the IPO price of $26 that was set yesterday. If an underwriter’s over-allotment is, just as analysts predict, exercised, that could have Twitter earning an additional $2.1 billion, thus making its IPO the second-largest Web-based stock market debut, right ahead of Facebook, Inc.’s (NASDAQ: FB), but behind that of Google, Inc.’s (NASDAQ: GOOG) IPO in 2004. Social networking platform Twitter currently has 230 million users, and has become the predominant microblogging site and one of the most visited websites on the Internet together with Google and Facebook.
Certain analysts believe that Twitter’s IPO may be more akin to that of Google, and that it may be headed for even better days going forward as it continues to establish itself as a global advertising tool. According to RBC Capital Markets analyst Mark Mahaney, Twitter users tend to search for specific people or pieces of information, and these amount to “powerful market signals” that are akin to Google’s, and are something that Facebook does not quite have as of the moment. In the run-up to the IPO, analysts had expressed concerns that Twitter may follow in the footsteps of Facebook, whose stock prices had fallen rapidly following the initial offering.
However, other analysts feel that Twitter may have been too conservative in pricing its IPO, thus costing it more than one billion dollars. “In my mind they certainly could’ve raised the price on this thing and gone into the low 30s,” posited O’Neil Securities director of NYSE floor division Kenneth Polcari. “From an outsider looking in I would say they were overly cautious because they didn’t want a disaster on their hands. I’m sure the company didn’t want a Facebook debacle, I get that, but I think they were overly cautious and it cost them some money.”
Twitter had officially started in 2006, and at first, it was not all too significant on a cultural and marketing standpoint, as many felt it was limited in its scope and potentially a fad that would eventually die out. But as more and more famous people, including celebrities and athletes, started using the service, average consumers began to see value in Twitter, using it as a way to “keep it short and sweet” when expressing one’s feelings or stating one’s observations, and reaching digital “followers” in the process. More recently, Twitter Chief Executive Richard (Dick) Costolo had been successful in monetizing its online business, earning $168 million in revenue as of quarter three 2013, or more than twice the amount of revenue earned in the year-ago June to September quarter.