Bil­lions are some­thing to twit­ter about

Weekend Argus (Saturday Edition) - - BUSINESS -

NEW YORK/ SAN FRAN­CISCO: Twit­ter shares jumped 73 per­cent in a fren­zied trad­ing de­but that drove the sev­enyear- old com­pany’s mar­ket value to about $ 25 bil­lion (R256bn) and evoked the heady days of the dot-com bub­ble.

The strong per­for­mance is en­cour­ag­ing for the venture cap­i­tal­ists who have backed other con­sumer web start-ups, such as Square or Pin­ter­est, though it sounded alarm bells for more cau­tious in­vestors.

“@ twit­ter open­ing at $ 45/ share? Al­most 50x rev­enues! We are of­fi­cially in an­other tech bub­ble,” tweeted fi­nancier Steve Rat­tner.

The stock closed its first day of trade on the New York Stock Ex­change at $44.90 a share af­ter hit­ting a ses­sion-high of $50, nearly dou­ble the ini­tial pub­lic of­fer­ing price of $26 set late on Wed­nes­day.

Twit­ter could raise $2.1bn if an un­der­writ­ers’ over- al­lot­ment is ex­er­cised, as ex­pected, mak­ing it the sec­ond-largest in­ter­net of­fer­ing in the US be­hind Face­book’s $16bn IPO last year and ahead of Google’s 2004 IPO, ac­cord­ing to Thom­son Reuters data.

Fans be­lieve Twit­ter, which has 230 mil­lion users, has es­tab­lished it­self as an in­dis­pens­able in­ter­net util­ity along­side Google 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, to ac­cu­sa­tions that they had been greedy in pricing the deal.

Twit­ter’s open­ing went with­out a hitch, prompt­ing An­thony Noto, the Gold­man Sachs banker who led the IPO, to write a sim­ple Tweet: “Phew!”

Still, Twit­ter may find it­self sub­ject to crit­i­cism that it had priced the shares too low and left more than a bil­lion dol­lars on the ta­ble.

The 70 mil­lion IPO shares rep­re­sent about 13 per­cent of the com­pany’s com­mon shares. Twit­ter was the most ac­tively traded stock on Thurs­day, with about 117 mil­lion shares chang­ing hands.

Heavy de­mand for the IPO was ap­par­ent be­fore the fi­nal pricing. Twit­ter was able to price the IPO above an al­ready raised in­dica­tive range, and the deal still at­tracted in­vestor sub­scrip­tions that to­talled 30 times the num­ber of shares on of­fer, ac­cord­ing to mar­ket sources.

At Twit­ter’s head­quar­ters in San Fran­cisco, of­fices opened early and hun­dreds of em­ploy­ees flocked to the 9th floor cafe­te­ria to watch the fes­tiv­i­ties on TV while eat­ing “cronuts”, a crois­sant-dough­nut hy­brid, made by Twit­ter’s res­i­dent chef, Lance Holton.

Twit­ter was de­rided by many in its early years as a silly fad dom­i­nated by peo­ple talk­ing about what they had for break­fast.

But Twit­ter quickly pen­e­trated pop­u­lar cul­ture in un­ex­pected ways, with its open de­sign and broad­cast­ing for­mat at­tract­ing celebri­ties, ath­letes, politi­cians and anybody who wanted to share short, punchy thoughts with a dig­i­tal au­di­ence.

Its busi­ness po­ten­tial de­vel­oped more slowly, and the com­pany ap­peared to be floun­der­ing as re­cently as three years ago, when it was riven by man­age­ment tur­moil and ser­vice out­ages.

Un­der Dick Cos­tolo, who took over as chief ex­ec­u­tive of­fer in Oc­to­ber 2010, Twit­ter has rapidly ramped up its money- mak­ing en­gine. – Reuters


FI­NAN­CIAL BLAST: A trader raises his hand just be­fore the Twit­ter IPO be­gins on the floor of the New York Stock Ex­change in New York on Thurs­day.

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