Twitter soars on Wall Street, avoiding Facebook's IPO woes
Though Twitter left millions of dollars on the table, its first-day closing price was up 73 percent, giving the social networking company an impressive market cap of $24.48 billion.
Twitter's long-awaited IPO went off without a hitch today, soaring above the official price the company set last night, finishing at $44.94 and giving the company a market capitalization of $24.48 billion.
Executives at Facebook can only look at Twitter's first day on Wall Street with envy. While Mark Zuckerberg's company is now flying high, its May 2012 IPO has become a cautionary tale in Silicon Valley for how not to go public. And clearly, Twitter studied the playbook and avoided making the mistakes that caused such a public relations nightmare for Zuck and Co.
Priced Wednesday at $26 a share, Twitter opened strong on Thursday at $45.10 and spent much of the day in that range. Though it briefly topped $50, it settled back into the $45 to $47 range as Thursday went on and finally ended up right about where it started this morning, dropping below $45 only just as the markets closed.
A first-day pop is common. AllThingsD's Kara Swisher tweeted yesterday that the average first-day rise for U.S.-listed IPOs this year is 17 percent. Twitter's, by comparison, was up 72.84 percent today.
All told, investors moved 113.6 million Twitter shares today. The question is why there was so much enthusiasm for a company that, although it has without question made a global impact and has more than 230 million average monthly users, has never made a dime of profit.
But while there's plenty of excitement around Twitter's massive reach, and its ability to be a real-time watercooler for just about any topic, that along won't bring home profits. What might do that is the company's ability to convince big advertisers that it will figure out how to turn the billions of tweets sent each week into a lucrative platform.
Already, its Amplify program, which gives big advertisers and TV networks a way to embed videos thick with ads into tweets, is earning respect from A-listers. For example, Les Moonves, chief executive of CNET parent CBS, said Wednesday, "Our live events are increasingly getting a lift from social media, which is proving to be a powerful complementary platform for us. And thanks to new deals like our Amplify initiative with Twitter, we're not only benefiting promotionally, but we're now beginning to monetize clips of these events as well."
Unsurprisingly, Twitter has long been compared to its closest rival, Facebook. But while there is plenty of cross-over between the two companies, their services, and their users, it's important to note that in actual size, they are more like distant cousins than siblings. Facebook, for example, has 1.15 billion users. And its market cap was $115.58 billion as of this writing, 4.7 times that of Twitter.
Still, Twitter has to be pleased that everything went so well today. Though it could have earned as much as an additional $1.325 billion by pricing its shares closer to what investors were willing to pay, it will never have to look back and answer embarrassing questions about how badly its IPO day went.
Meanwhile, other social networking companies in Silicon Valley have to be salivating at the opportunity to leverage the obvious desire for hot tech outfits. Over at Pinterest and Snapchat, executives must be wondering just how quickly they can get their IPO paperwork in order.
Twitter's own executive chairman, Jack Dorsey, might beat them all to the punch. According to the Wall Street Journal, Square, the mobile payments company Dorsey founded in 2009, is now considering an IPO for 2014. With Twitter shares potentially worth as much as $1.09 billion, one might ask just how much money is enough for Dorsey? If it's his magic that helped Twitter find gold at the New York Stock Exchange today, then perhaps his mountain of cash may just get bigger and bigger next year.
