Twitter Prices IPO Above Estimates at $26 Per Share, Valuation Up to $18B | Hacker News Reader

Twitter Prices IPO Above Estimates at $26 Per Share, Valuation Up to $18B

techcrunch.com

42 pointsMcKittrick53 comments

It really baffles me why the share price is reported as if it means anything at all on its own.

The reason is that the per-share value is best for people who already own or follow the stock.

For example, Twitter employees can quickly ballpark the dollar value of their shares with the $26 number. It's also easier for tracking movement (e.g., $20 last week, $26 this week).

It's the same reason that all ticker prices are in per-share value rather than market cap. $XOM at $93.22 means less to me personally than "Exxon Mobil is worth $400 billion," but the per-share value is probably most relevant to people with business interest in Exxon.

It reminds me of when athletes' contracts are discussed - "X gets $100 million!" - with no mention of how many years the contract lasts. It matters!

What? It means a lot, starting with how much money twitter will raise. Then it suggests a rough valuation (at usually a modest discount) to what institutional investors think the company is worth.

His point is price means nothing except in the context of how many shares there are, but yet the amount of shares is never talked about only the price. 200 shares at 100 dollars means nothing but 1 million shares at 100 dollars means much more.

Well, since we already knew the number of shares, the comment made little sense to me.

It baffles you?

Sure, the price doesn't matter much to a retail investor. But millions of shares will be bought tomorrow at that price so it certainly means something to the right people.

Which headline do you think is more informative to TechCrunch's audience?

Twitter Prices IPO At $26 Per Share

Twitter Prices IPO At $18 Billion Valuation

The first since it's is the new bit of information. The valuation is then implied since the number of shares is already known.

Both are useful and necessary.

Yes, they are both useful and relevant when used in combination but alone stock price is pretty meaningless.

Before Berkshire Hathaway issued a stock split (1 share becomes 2 or more shares) a share was worth ~$172,000. Today Apple trades at $520 and MSFT at $38.

Alone those numbers are of no use. You don't know how much the actual company is worth. Share price * share volume = Market Cap. You need to know at least two of those values to make an informed decision.

Well, if you're a Twitter employee with 25,000 vested shares, you probably care more about the share price than the market cap.

It's reported because the other big tech IPO recently was Facebook, which went from ~$40 down to ~$20, back up to ~$50. They're trying to provide a reference point to the other major social networking company on the stock market.

Of course anyone with a bit of sense knows that it's not the individual share price that matters; but with something as famous as Twitter, that is not necessarily who you are marketing the IPO at.

An $18 billion valuation for a company with dramatically accelerating losses, currently at the rate of over $20M per month. What could possibly go wrong there?

Really? You're going to trot out the age-old HN aversion to loss-making? It's time for HNers to learn that ambitious companies that know how to invest resources SHOULD be making losses. IPOs are fundraising events. The capital is expected to be invested into the business to drive further growth. When companies lose the ability to invest at acceptable returns, then you might see them shift the balance to profit-making.

Valued the same as Tesla. Is there anyone here who would rather own Twitter instead of Tesla five years from now?

Personally, I would shy away from both of them. If you really want to be in one of these companies, at least Facebook has earnings and scale. I've never liked twitter and get no value out of it, so perhaps I'm the wrong guy to ask, but I suspect Twitter is headed the way of MySpace.

> Twitter is headed the way of MySpace

Possibly. Once Instagram's number of users (150 million) hits Twitter's number of users (232 million) it won't be looking so good for Twitter, if Instagram continues to grow. Maybe Twitter will take over SnapChat (26 million users) though. Twitter just isn't gaining, they seem pretty stagnant, taking over a younger company could give them some growth.

The comparison to Instagram is interesting. I used to do some marketing on Vine. Our traffic from Vine dropped more than 90% in less than 1 week after Instagram introduced video. That's how fast a replacement for Twitter could gobble up its business as well. IMO, Twitter is better suited as a feature, not a product, and definitely not an $18 billion company.

While I think you're quite wrong about the MySpace comparison, I also agree that FB is the safest social media play.

I don't think the use of the word "safe" or any derivative of it is appropriate with the shares of any publicly-traded social media company.

That said, even though Twitter's valuation looks quite rich at $26/share from a financials perspective (to say the least), I think some investors who have (or want) positions in social media companies are considering Twitter's demographic profile, which also happens to be Facebook's biggest potential Achilles heel.

The fact that Twitter is seen by some as a benefactor of Facebook's growing teen attrition may not be a wise rationale for a Twitter investment, but if you're hell bent on taking a cruise on the Titanic, why not rearrange the deck chairs to get yourself a view that's more to your liking?

It is, of course, not a mutually exclusive situation. But to your point about demos, if you look at the data it paints a different picture than what you've suggested. As an investor in FB (not that that makes me special) I read the Piper Jaffrey report that I presume you're citing. What it overlooks is that FB owns Instagram. Where FB is weak demographically, Instagram is strong.

Moreover, FB's value has never been strength among the youngest demographic. Sure, hooking a user early is great but hardly the only path to acquisition. Just ask my mom. Or, probably, your own.

And feel free to use whatever language you want. I stand by what I said.

$1.8 billion. 70 million shares at $26 a piece. Am I missing something?

They're selling 70M shares, aiming to raise approx. $1.8B. However, there are over 700M fully diluted shares. At $26 a piece this makes a total valuation of $18B.

Ah, thank you for clarifying!

what's your data for said accelerating losses?

"But for all its power and reach, Twitter gushes losses — $65 million in the third quarter, nearly three times more than it lost a year ago."

http://triblive.com/business/headlines/5012201-74/twitter-co...

In case you're curious, the lockup expiration will happen 180 days after IPO, or May 6, 2014. I already added a note to my calendar.

What are you expecting at that point? FB's major lockup expiration (Nov 14 2012) was preceded by a dip a few days prior (not the lowest price in the previous few weeks though) and then went up on the lockup date.

Are you expecting a similar drop as news articles go out about the pending lockup a week/days before, followed by it going up after some people realise everyone knew about this all along?

FB had three lockup expirations and the first two caused dips.

And, essentially, yes. Most lockup expirations, in my experience, seem cause a meaningful dip in the company's stock price. This happened with Zillow a couple years ago, it just happened to Tableau last week, and it happened twice to FB, and those are just the examples I can think of off the top of my head.

By then, the market will have priced in the lockup expiration. It should, but is most certainly not, doing it at the IPO.

Totally disagree: http://aswathdamodaran.blogspot.com/2012/11/much-ado-about-l...

What is expected to happen when the lockup expires?

My guess is that the price drops because of so many employees selling at once, but I don't pretend to understand finance.

Right, exactly, it's a supply and demand thing. You have X shares trading on the market, and all of a sudden you have something like 3 or 4 * X shares trading hands. Unless there are, all of a sudden, a commensurate number of new share purchasers, it'll drive the price down.

Twitter 2007: Who wants to post status messages which are limited to 140 characters

Twitter 2010: Who wants to invest in a company which limits status messages to 140 characters

Twitter 2013: Who thinks $26/share is a viable price for a company which limits what people say to 140 characters, has no photo albums, events and all of facebook's features (hint: Twitter is not Facebook)

That's all fine and dandy but the proof of the pudding lies in a successful monetization strategy. From where I'm sitting, I just can't see how they're ever going to convince enough people to pony up (directly or indirectly) for what is, at its core, an artificially constrained public sms service (that thus far they've been accustomed to using for free).

What? People already pay to advertise on the service, the convincing is happening right now.

In a sane world I don't think there will be enough of them to stem the losses and deliver a solid return on an IPO that values the company in the double digit billions. Happy to be wrong but only time will tell.

>Who thinks $26/share is a viable price

Depends on how many shares exist, doesn't it? A year ago, MSFT was near $26/share. That number is meaningless by itself.

The market conditions this past week or so have been rough on tech stocks. I'm sure it's not what Twitter management would consider ideal, but pulling an IPO is a very drastic move. As is, anything could happen tomorrow.

Maybe all the tech stock fans are cashing out in preparation to sink it all into Twitter...

Ok, maybe? But do you really think that's what's happening? More likely, I think a generally underwhelming earnings season has deflated a few of these momo stocks.

I actually do suspect that's what's happening, yes.

I think that's a little naive. The market cap of twitter does not make up for the losses in tech over the last 2-3 weeks. And that's as-if there is no new money in the game, that to buy one stock you have to sell the rest. Which means paying taxes. Not for macro reasons but JUST to buy a new offering?

Twitter is not the only big IPO. There is no pattern of market turndown in the lead up to an IPO. The whole idea is a bit silly to me.

2-3 weeks? I was thinking just the day or two before actually, and only the handful of really popular tech stocks. Thanks for your patronizing put down though.

I'm anticipating a fall to the more realistic $14 immediately after open, similar to FB.

What I'm actually doing is something completely illogical.

Yep, time after time I carefully plot out a short and don't have the balls to go through with it. I've lost millions on paper at this point. :) Sigh. :(

You can't short an IPO...

Not immediately, but you could probably find an entity to borrow them off, pretty quickly.

I wouldn't have thought it would affect the overall shorting effect too much either.

http://www.investopedia.com/ask/answers/05/062905.asp

Twitter IPOs at $26/share with 700 million shares. Facebook ipo'ed at $38/share with 2.55 billion shares. Mathematically, Twitter's IPO is about 1/4 the value of Facebook.

Twitter has 200 million active users Facebook has 1.15 billion active users

I don't think twitter is worth 1/5 the market cap of Facebook. It doesn't have photo albums, groups, calendars, events that facebook does, and twitter still has a long way to go for mobile. Most of my friends uses a third party tweet client (like tweetbot) and don't even have twitter's app installed.

Therefore, I think Twitter is very much overpriced. Did I miss something?

https://blog.twitter.com/2013/celebrating-twitter7 http://thenextweb.com/facebook/2013/07/24/facebook-users-q2-...

It would be better to consider Facebook's monthly active users at the time of their IPO.

The breakdown looks more like this:

Facebook at IPO: MAU: $845M [1], Valuation: $104B [1], Value/User = $123

Facebook Today: MAU: 1.15B [2], Valuation: $120B [3], Value/User = $104

Twitter at IPO: MAU: 218M [4], Valuation: $18.1B [5], Value/User = $83

[1] http://en.wikipedia.org/wiki/Initial_public_offering_of_Face...

[2] http://thenextweb.com/facebook/2013/07/24/facebook-users-q2-...

[3] https://www.google.ca/finance?q=NASDAQ:FB

[4] http://techcrunch.com/2013/10/03/blindtweeting/

[5] http://techcrunch.com/2013/11/06/twitter-prices-ipo-at-26-pe...

Wallstreet is insane if it thinks Twitter is making $80 a user in the lifetime of the company.

Yes.

First, the IPO is 18% as big as Facebooks, not 25%.

Second, if Twitter closes at this $26 share tomorrow, it will have a market cap about 15% the size of Facebook.

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