The indicative $45-47 opening price finally convinced me of getting out of (tech) stocks in general. We're talking about $20B valuation for a company which has never made money. I know "this is different", and it has a lot of users, and so on.
Biggest thing to remember is that this is an exit, the end for the early investors. As far as I'm concerned, that's all it is. To me, in a lot of ways, this is the "end" of Twitter (not as a company, necessarily) in the sense that everything changes now. All of the details of their financials are going to be exposed from here on out, for better or worse. It's no longer about just user acquisition, it's about making money to satisfy the many more shareholders that they are about to get. It'll be interesting to watch!
Maybe I'm old, but I'm still struggling to figure out if Twitter is a short-term fad, or a serious here-to-stay concept (and thus a company) in our lives. I like to imagine say a 10-15 year time frame, and if I think the company will still be around then.
Netflix, for example, at least has a business model which I see becoming pervasive 15 years down the line (on-demand entertainment over the internet). Of course I don't know if Netflix will be the company to dominate that business model 15 years down the line.
With Twitter, I am not yet convinced this has long-term value here, but maybe I don't get the value it has in other's minds.
A $45 market price after a $26 IPO means Twitter left over $1B on the table, doesn't it? They would've had that money, instead of the first investors who can now immediately sell the shares at a huge profit, if the initial price was set closer to what the market would've paid.
They only floated about 10% of their outstanding stock on a fully diluted basis.
Twitter (the company) could have raised more, but individuals who owned the stock before the IPO still see the gain, unless they did a secondary market offering.
Given the dangers of overpricing, it's a price worth paying.
(If the stock falls in value on the first day of trading, it may lose its marketability with investors and hence even more of its value.)
A question: In an IPO, does the company have to sell every share for the same price? As in a typical market, the price fluctuates based on demand. Couldn't they evaluate the demand for the shares and adjust their sell price higher to compensate, or is it part of the legal framework that they are required to sell all the shares at exactly the same price?
Approximately $11B According to my quick calculations. TWTR market cap is at $25B currently. They sold 544.7M shares for $26, ~$14B in all. That leaves an $11B difference.
I know lots of people are against twitter because they're not yet making any money.
The thing about market prices on any market is that the price doesn't reflect what they're doing now. This isn't something thats 'different', it applies to everyone. It reflects what we all perceive they're capable of a couple of years from now.
I think twitter has a lot of potential because its something so simple and you would find an older audience more engaged in it. Quite simply put, people love it.
I'm incredibly ignorant when it comes to the stock market. But why would any company elect to go public? Let's see: you lose your creative edge 90% of the time, you destroy the relationships with your users 50% of the time, your team vision becomes one that must equate to profits - forever. This is not natural - to be constantly growing and profiting. Small businesses (you know, the millions of them) seem to hold their ground better in turbulent times, despite their lack of hand-over-fist profits.
This idea of unlimited growth is unsustainable and people who can't see that are just as bad as a 2008-era stock broker as far as I can see. It's a very willing and eager group of apologists and utopian dreams. Honestly.
You get to turn pieces of paper which say "I own x% of TWTR" into pieces of paper which say "I own $y". A lot of people are happy to make that trade, especially if they don't think their ownership of the company is worth the amount of money that people are willing to pay for it.
As for the people who actually just work at Twitter, or who run Twitter? Well, you certainly get a lot more money to work with so long as your stock price doesn't collapse. You no longer have to go lobby certain individuals for money as much as you used to. Sure, you have to focus on making profits now, but that was always kind of the point, right? That doesn't mean you have to be short-sighted. Just look at a company like Amazon for an example of how a patient company can still command a high stock price and respect even when they're not pumping out huge profits.
Also, the vast majority of small businesses are abject failures. Most economic growth occurs through the activity of massive corporations (from the business side of things).
At least, that's my understanding. Feel free to point out if I'm full of shit, please.
Because that's how all of the original investors cash out. They originally purchased shares in the company to invest in it. The original investment went to the company itself. For argument sake, let's say they purchased those shares originally for $5 each. Now that the company is public, they can sell those shares on the open market for $45 each. The IPO is a combination of the company selling more shares to shore up its cash on hand, and for original investors to be able to sell their shares at a profit.
All of the money-related reasons others have talked about are valid, but there are also some legal reasons where you have to go public (such as a certain number of shareholders, which comes into play when companies give stock options as compensation). Facebook would still be private if they legally could have delayed any longer, I believe. You are entirely right that there are huge advantages to being private in a lot of cases.
You go public to raise a large amount of capital. No venture investor is going to give you billions of dollars.
For instance, Twitter just raised 1.8 billion in CASH. Presumably this is for them to scale up their operations. This is why public markets exist, and this is why companies go public.
I've always noticed that there is sometimes a correlation between those that make money and those that can understand what a "sucker" will go for.
What I mean is that many people make money by understanding the stupidity of people and taking advantage of that.
As opposed to thinking all logically with intelligence as far as why would someone pay me to do that! It's so simple!
An example of this (that might hit home to the tech crowd) is a "tech guy/gal" who under prices what they do thinking it is simple to install open source software on someone's box. Instead of realizes that to a "normal" it's a big ball of confusion and they would be quite pleased to just have an installed turnkey product with 5 minutes of handholding.
I can't stress this enough. You get paid for what you know that someone else's doesn't know. And you deserve to. So don't give it away without getting paid.
Can you explain this? Do you believe that public companies can't play a role in world events? Seems like this is contradicted by any number of public companies.
Regarding the profitability piece, they closed their mopub acquisition this week - something i believe will make or break the future of TWTR reopvenue... I believe the money is on that piece to perform or the company is dead in the water.
MoPub is the key for Twitter, I agree. It offers them a way to jump in as the leader in multi-touch/multi-device attribution, something that marketers will pay through the nose for (I know I would). I'm really interested to see what they do with it.
It's not relevant to the price, but they had Patrick Stewart open the market with them. Well, having Captain Picard open the market shouldn't be relevant to the price anyway.
[+] [-] sz4kerto|12 years ago|reply
Still, I'd be cautious.
[+] [-] JonFish85|12 years ago|reply
[+] [-] sheri|12 years ago|reply
Netflix, for example, at least has a business model which I see becoming pervasive 15 years down the line (on-demand entertainment over the internet). Of course I don't know if Netflix will be the company to dominate that business model 15 years down the line.
With Twitter, I am not yet convinced this has long-term value here, but maybe I don't get the value it has in other's minds.
[+] [-] pachydermic|12 years ago|reply
EDIT: Wow! Who are the people buying this at $49 a share?!
[+] [-] ry0ohki|12 years ago|reply
[+] [-] unknown|12 years ago|reply
[deleted]
[+] [-] ThomPete|12 years ago|reply
[+] [-] dangrossman|12 years ago|reply
[+] [-] applecore|12 years ago|reply
Twitter (the company) could have raised more, but individuals who owned the stock before the IPO still see the gain, unless they did a secondary market offering.
Given the dangers of overpricing, it's a price worth paying.
(If the stock falls in value on the first day of trading, it may lose its marketability with investors and hence even more of its value.)
[+] [-] Osiris|12 years ago|reply
[+] [-] kmfrk|12 years ago|reply
[+] [-] Nicholas_C|12 years ago|reply
[+] [-] unknown|12 years ago|reply
[deleted]
[+] [-] Tarang|12 years ago|reply
The thing about market prices on any market is that the price doesn't reflect what they're doing now. This isn't something thats 'different', it applies to everyone. It reflects what we all perceive they're capable of a couple of years from now.
I think twitter has a lot of potential because its something so simple and you would find an older audience more engaged in it. Quite simply put, people love it.
[+] [-] tomkin|12 years ago|reply
This idea of unlimited growth is unsustainable and people who can't see that are just as bad as a 2008-era stock broker as far as I can see. It's a very willing and eager group of apologists and utopian dreams. Honestly.
[+] [-] pachydermic|12 years ago|reply
As for the people who actually just work at Twitter, or who run Twitter? Well, you certainly get a lot more money to work with so long as your stock price doesn't collapse. You no longer have to go lobby certain individuals for money as much as you used to. Sure, you have to focus on making profits now, but that was always kind of the point, right? That doesn't mean you have to be short-sighted. Just look at a company like Amazon for an example of how a patient company can still command a high stock price and respect even when they're not pumping out huge profits.
Also, the vast majority of small businesses are abject failures. Most economic growth occurs through the activity of massive corporations (from the business side of things).
At least, that's my understanding. Feel free to point out if I'm full of shit, please.
[+] [-] jstalin|12 years ago|reply
[+] [-] the_watcher|12 years ago|reply
[+] [-] Mikeb85|12 years ago|reply
For instance, Twitter just raised 1.8 billion in CASH. Presumably this is for them to scale up their operations. This is why public markets exist, and this is why companies go public.
[+] [-] jstalin|12 years ago|reply
[+] [-] larrys|12 years ago|reply
What I mean is that many people make money by understanding the stupidity of people and taking advantage of that.
As opposed to thinking all logically with intelligence as far as why would someone pay me to do that! It's so simple!
An example of this (that might hit home to the tech crowd) is a "tech guy/gal" who under prices what they do thinking it is simple to install open source software on someone's box. Instead of realizes that to a "normal" it's a big ball of confusion and they would be quite pleased to just have an installed turnkey product with 5 minutes of handholding.
I can't stress this enough. You get paid for what you know that someone else's doesn't know. And you deserve to. So don't give it away without getting paid.
[+] [-] ChristianMarks|12 years ago|reply
[+] [-] the_watcher|12 years ago|reply
[+] [-] ketralnis|12 years ago|reply
[+] [-] nicholassmith|12 years ago|reply
[+] [-] gcv|12 years ago|reply
[+] [-] yannisp|12 years ago|reply
[+] [-] the_watcher|12 years ago|reply
[+] [-] nicholassmith|12 years ago|reply
[+] [-] joosters|12 years ago|reply