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Twitter soars in market debut

Published: Thursday, Nov. 7, 2013 5:06 p.m. CDT
Caption
(Richard Drew)
Twitter CEO Dick Costolo, Chairman and co-founder Jack Dorsey, and co-founders Evan Williams and Biz Stone, front row left to right, applaud as they watch the the New York Stock Exchange opening bell rung, Thursday, Nov. 7, 2013. If Twitter's bankers and executives were hoping for a surge on the day of the stock's public debut, they got it. The stock opened at $45.10 a share on its first day of trading, 73 percent above its initial offering price. (AP Photo/Richard Drew)
Caption
(Richard Drew)
Mike Gupta, Twitter's chief financial officer, photographs a board at the post before shares begin trading during the IPO, on the floor of the New York Stock Exchange, Thursday, Nov. 7, 2013. If Twitter's bankers and executives were hoping for a surge on the day of the stock's public debut, they got it. The stock opened at $45.10 a share on its first day of trading, 73 percent above its initial offering price. (AP Photo/Richard Drew)
Caption
(Richard Drew)
Twitter CEO Dick Costolo, left, and Mike Gupta, center, chief financial officer of Twitter, talk with specialist Glenn Carell during Twitter's IPO, on the floor of the New York Stock Exchange, Thursday, Nov. 7, 2013. If Twitter's bankers and executives were hoping for a surge on the day of the stock's public debut, they got it. The stock opened at $45.10 a share on its first day of trading, 73 percent above its initial offering price. (AP Photo/Richard Drew)
Caption
(Richard Drew)
Twitter CEO Dick Costolo uses his mobile phone on the floor of the New York Stock Exchange, Thursday, Nov. 7, 2013. If Twitter's bankers and executives were hoping for a surge on the day of the stock's public debut, they got it. The stock opened at $45.10 a share on its first day of trading, 73 percent above its initial offering price. (AP Photo/Richard Drew)
Caption
(Mark Lennihan)
Twitter signage is draped on the facade of the New York Stock Exchange, Thursday, Nov. 7, 2013 in New York. Twitter set a price of $26 per share for its initial public offering on Wednesday evening and will begin trading Thursday under the ticker symbol "TWTR" in the most highly anticipated IPO since Facebook's 2012 debut. (AP Photo/Mark Lennihan)
Caption
(Kathy Willens)
A banner adorns the facade of the New York Stock Exchange in advance of Twiiter's initial public offering Thursday, Nov. 7, 2013, in New York. Twitter shares, valued at $26 per share, are set to begin trading on the stock exchange Thursday. The company is valued at $18.1 billion. (AP Photo/Kathy Willens)
Caption
(Richard Drew)
Twitter CEO Dick Costolo, center, and Mike Gupta, chief financial officer of Twitter, wait for shares to begin trading during the IPO, on the floor of the New York Stock Exchange, Thursday, Nov. 7, 2013. If Twitter's bankers and executives were hoping for a surge on the day of the stock's public debut, they got it. The stock opened at $45.10 a share on its first day of trading, 73 percent above its initial offering price. (AP Photo/Richard Drew)
Caption
(Richard Drew)
Twitter co-founder Biz Stone holds a letter given to him by Vivienne Harr, a girl who sells lemonade in the name of ending slavery across the globe, as he waits for her and others to ring the opening bell of the New York Stock Exchange, for the Twitter IPO, Thursday, Nov. 7, 2013. If Twitter's bankers and executives were hoping for a surge on the day of the stock's public debut, they got it. The stock opened at $45.10 a share on its first day of trading, 73 percent above its initial offering price. (AP Photo/Richard Drew)
Caption
(Richard Drew)
Twitter CEO Dick Costolo, uses his mobile phone as he waits for shares to begin trading during the IPO, on the floor of the New York Stock Exchange, Thursday, Nov. 7, 2013. If Twitter's bankers and executives were hoping for a surge on the day of the stock's public debut, they got it. The stock opened at $45.10 a share on its first day of trading, 73 percent above its initial offering price. (AP Photo/Richard Drew)
Caption
(Ben Hider)
Bureau Chief of Public Information for the Boston Police Department Cheryl Fiandaca, left, Cheryl Fiandaca, a girl who sells lemonade in the name of ending slavery across the globe, NYSE Executive Vice President Scott Cutler, and actor Sir Patrick Stewart, right, applaud the New York Stock Exchange opening bell is rung for the Twitter IPO, Thursday, Nov. 7, 2013. If Twitter's bankers and executives were hoping for a surge on the day of the stock's public debut, they got it. The stock opened at $45.10 a share on its first day of trading, 73 percent above its initial offering price. (AP Photo/Ben Hider, NYSE)

NEW YORK – Shares of Twitter went on sale to the public for the first time Thursday, instantly leaping more than 70 percent above their offering price in a dazzling debut that exceeded even Wall Street’s lofty hopes.

By the closing bell, the social network that reinvented global communication in 140-character bursts was valued at $31 billion – nearly as much as Yahoo Inc., an Internet icon from another era, and just below Kraft Foods, the grocery conglomerate founded more than a century ago.

Twitter, which has never turned a profit in the seven years since it was founded, worked hard to temper expectations ahead of the IPO, but all that was swiftly forgotten with the stock’s opening surge.

The most anticipated initial public offering of the year was carefully orchestrated to avoid the glitches and eventual letdown that surrounded Facebook’s first appearance on the NASDAQ 18 months ago.

Trading on the New York Stock Exchange under the symbol “TWTR,” shares opened at $45.10, 73 percent above their initial offering price.

In the first few hours, the stock jumped as high as $50.09. Most of those gains held throughout the day, with Twitter closing at 44.90, despite a broader market decline.

The narrow price range indicated people felt it was “pretty fairly priced,” said JJ Kinahan, chief strategist at TD Ameritrade.

The immediate price spike “clearly shows that demand exceeds the supply of shares,” said Wedbush analyst Michael Pachter.

Earlier in the day, Twitter gave a few users rather than executives the opportunity to ring the NYSE’s opening bell. The users included actor Patrick Stewart, who played Captain Jean-Luc Picard in “Star Trek: The Next Generation”; Vivienne Harr, a 9-year-old girl who ran a lemonade stand for a year to raise money to end child slavery; and Cheryl Fiandaca of the Boston Police Department.

Twitter raised $1.8 billion Wednesday night when it sold 70 million shares to select investors for $26 each. Had it priced the stock at $30, for instance, the company would have taken away $2.1 billion. At $35, it would have reaped nearly $2.5 billion.

“In hindsight, when you look at this, you almost think they left a little too much money on the table,” Entner said.

Named after the sound of a chirping bird, Twitter’s origins date back to 2005, when creators Noah Glass and Evan Williams were trying to get people to sign up for Odeo, a podcasting service they created. Odeo didn’t make it.

By early 2006, Glass and fellow Odeo programmer Jack Dorsey began work on a new project: teaming with co-worker Christopher “Biz” Stone on a way to corral text messages typically sent over a phone.

It was Glass who came up with the original name Twttr. The two vowels were added later. The first tweets were sent on March 21, 2006.

By 2007, Twitter was incorporated with Dorsey as the original CEO and Williams as chairman. Dorsey and Williams would eventually swap roles. Both remain major shareholders, though neither runs the company. Glass, meanwhile, was effectively erased from Twitter’s history, writes New York Times reporter Nick Bilton in “Hatching Twitter: A true story of money, power, friendship, and betrayal.”

Since those early days, the site has attracted world leaders, religious icons and celebrities, along with CEOs, businesses and countless marketers and self-promoters.

The company tried to avoid the trouble that plagued Facebook’s high-profile debut, which was marred by technical glitches. As a result, the Securities and Exchange Commission fined Nasdaq $10 million, the largest ever levied against an exchange.

The clumsy debut had lasting consequences for Facebook, which closed just 23 cents above its $38 IPO price on that first day and later fell much lower. The stock needed more than a year to climb back above $38.

Those problems likely led Twitter to the NYSE.

As of midday Thursday, Twitter trading had “gone on pretty flawlessly,” Kinahan said.

Other tech stocks were down, with Facebook Inc. sliding $1.02, or 2.1 percent, to $48.10.

At its IPO price, Twitter was valued at roughly 28 times its projected 2013 revenue — $650 million based on its current growth rate. In comparison, Facebook trades at about 16 times its projected 2013 revenue, according to analyst forecasts from FactSet.

Google Inc. meanwhile, is trading at about 7 times its net revenue, the figure Wall Street follows that excludes ad commissions.

Research firm Outsell Inc. puts Twitter’s fundamental value at about half of the IPO price, says analyst Ken Doctor. That figure is based on factors such as revenue and revenue growth.

“That’s not unusual,” Doctor says. “Especially for tech companies. You are betting on a big future.”

As a newly public company, one of Twitter’s biggest challenges will be to generate more revenue outside the U.S.

More than three-quarters of Twitter’s 232 million users are outside the U.S. But only 26 percent of Twitter’s revenue comes from abroad. The company has said that it plans to hire more sales representatives in countries such as Australia, Brazil and Ireland.

Twitter shares enter a frothy market. The Dow Jones industrial average closed Wednesday at a record high, up 128 points, or 0.8 percent, to 15,746. The Standard & Poor’s 500 index rose seven points, or 0.4 percent, to 1,770, just one point below its own all-time high.

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