Twitter hatchling soars: Investors snap up 70 million TWTR shares – and want more (+video)
Twitter opened strong Thursday on the New York Stock Exchange, as investor demand drove the price of a share more than 70 percent above its opening of $26. While Twitter reported losses this fall, it has invested heavily in growth.
As the New York Stock Exchange's opening bell pealed across the trading floor Thursday morning, heralding Twitter's first day as a publicly owned company, an investment scramble immediately drove the price of a share to $45.10, 73 percent above the opening share price of $26. The spike was driven by investors demanding 30 times more than the 70 million available shares; the share price of TWTR steadily hovered above $45 through the mid-afternoon.
The owners of Twitter, the free online microblogging platform that has facilitated political uprisings and sexting scandals via users' 140-character messages – along with a lot of self-hype this week, as one user observed – have yet to turn a profit off their hungry and growing eight-year-old company. But the more than $3 billion they've made today will allow them to fund eight new revenue streams, including ads targeted to specific audiences and more sales of user data to analytics companies.
Twitter had lost a total of $483 million by this fall, a quarter that also saw one of the company's biggest three-month losses ($65 million) in the past three years. But AP reported that its revenue last quarter also doubled from this time last year, to $169 million. If that seems confusing – that its losses and revenues could be growing at the same time – it's because the company has been pouring money into growth. During that quarter, the company hired 300 new employees, building a workforce of 2,300.
Those workers have got to be in high spirits today. According to Twitter's recent securities filing, the company distributed nearly 86 million restricted stock units among its employees – 16 million more than it sold on the stock exchange Thursday morning. At current rates, those shares are worth about $3.9 billion, or an average of $1.7 million per employee, according to the Wall Street Journal, though the stock is not divided evenly, and most of it can't be sold for years.
Twitter's IPO is the largest from a US technology company since Facebook’s debut in May 2012, which was an alarming flop that saw stock prices plummet on the day they were released. Facebook, whose IPO was widely regarded as damagingly over-hyped, was able to rebound by the start of 2013, but observers say Twitter likely drew valuable lessons from the debacle, such as keeping its initial offering modest.
While Facebook is much more widely recognized and used than Twitter, the smaller company continues to grow, with at least 230 million monthly active users. IPO analyst Francis Gaskins told Bloomberg West that this lower awareness may turn out to be an advantage.
"People don't really understand Twitter, they don't really understand the revenue model. And that's really good for a software, to come public and for people not to totally understand it," said Mr. Gaskins, who is paid to offer advice on IPOs. "The pot is definitely boiling for Twitter," he said.
Twitter has said it may release another 10.5 million shares, if trading remains high.