The stock closed its first trading day at USD 44.90 a share from the initial public offering price of USD 26 set late on Wednesday, falling back from a near-doubling in price at a session high of USD 50. (Agencies)
Investor enthusiasm for the microblogging company defied traditional valuation analyses. The shares traded at about 22 times forecast 2014 sales, nearly double the multiple at social media rivals Facebook Inc (FB.O) and LinkedIn Corp (LNKD.N), even though Twitter is far from turning a profit and posted a loss of almost USD70 million for its most recent quarter.
Yet fans believe that Twitter, which has 230 million users globally, has established itself as an indispensable Internet utility, alongside Google Inc (GOOG.O) and Facebook, and that it has only scratched the surface of its potential as a global advertising medium.
"When people use Twitter they are following certain people, they're searching for specific information," said Mark Mahaney, an analyst at RBC Capital Markets. "There are powerful marketing signals that are almost Google-esque, something that Facebook doesn't really have."
The IPO was shadowed for months by Facebook's troubled 2012 debut, in which the shares quickly fell below their offering price amid trading glitches and subjected the company and its lead banker, Morgan Stanley (MS.N), to accusations that they had been greedy in pricing the deal.
Twitter's opening appeared to go off without a hitch, prompting Anthony Noto, the Goldman Sachs (GS.N) banker who led the IPO, to write a simple Tweet: "Phew."
Still, Twitter may find itself subject to the opposite criticism, that it had priced the shares too low and left more than a billion dollars on the table.
"In my mind they certainly could've raised the price on this thing and gone into the low 30s," said Ken Polcari, director of the NYSE floor division at O'Neil Securities. "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."
Heavy demand for the IPO shares was apparent before the final pricing. Market sources said investors had asked for 30 times the 70 million shares on offer in the IPO, representing about 13 percent of Twitter's outstanding common shares.
Twitter could raise USD 2.1 billion if an underwriters' over-allotment is exercised, as expected, making it the second largest Internet offering in the United States behind Facebook Inc's (FB.O) USD 16 billion IPO last year and ahead of Google Inc's (GOOG.O) 2004 IPO, according to an agency’s data.
The stock closed its first trading day at USD 44.90 a share from the initial public offering price of USD 26 set late on Wednesday, falling back from a near-doubling in price at a session high of USD 50.