Twitter Flies On Its First Day: Shares Pop 74% On First Trades, $31.8B Valuation | Hacker News Reader

Twitter Flies On Its First Day: Shares Pop 74% On First Trades, $31.8B Valuation

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16 pointssiculars24 comments

I'm sorry, newbie to stocks, trading, etc here. Can someone explain how they IPOed at 26 dollars but somehow opened today at $45.10? Isn't today the first time people can buy stock? Why did they not open at their IPO price? I guess I don't understand exactly what an IPO entails.

Twitter does not sell directly on the exchanges. Instead, various big banks have purchased "first dibs" on the stock directly from Twitter. THEIR price was $26 a share.

Now before you call this "unfair", remember that Facebook's IPO went downwards rather quickly, and is considered to be a failure. Banks definitely lost money by participating in Facebook's IPO, which IPOed at $38 and then fell to $20 for months.

Its too early to call Twitter's IPO a success btw. Lets wait for a week, and see where the stock ends up. IPOs are extremely volatile.

Of course, if the banks held FB stock for sometime, they'd realize a profit based on todays price.

Remember what's a "failure" for banks is a "win" for people like Zuckerberg.

Having a giant pop like this means you've left a lot of money on the table. If people were willing to pay $45 for Twitter shares and you sold them for $26, then you got ripped off.

The ideal IPO price is one that doesn't rise or sink, meaning you nailed it.

Precisely. If Twitter IPOed at $40, they'd have $2.7 Billion instead of $1.8 Billion. Since Twitter set the bar too low, they're missing out on almost a billion in hard cash right now.

Awesome. This is the step I was missing. Thanks.

So basically by selling to banks the Twitter guys were betting that banks are either overvaluing the stock or predicting correctly the stock price. What makes them possibly think they have better knowledge of the market than the banks?

They don't. The only goal of Twitter guys was to get a whole bunch of money.

Twitter has gotten $1.8 Billion out of this deal already. Once Twitter sells stock off to the banks, the money no longer reaches them.

That said, if Twitter wants to sell additional stock at a later date on the public market, they'd prefer if the stock price were high.

Wow. I've never seen a remotely interesting sponsored tweet so I'm surprised if advertising was an effective way forward for them.

The proof is in the pudding - we've had solid success with Twitter advertising, to the point where the leads coming from them are higher-converting or higher-quality-after-convert than some other, more expensive sources.

As a Twitter non-user I don't get it either. But hey, the results don't lie.

Very interesting. Would you mind sharing which vertical/industry you are in? Do you think your success is because competition is currently low or because you can do something clever in targeting the ads?

The way I see it Twitter is either a broadcast channel for people who want to share lots of self-important things or a stalking channel where people can follow celebrities etc. Eithe way I don't see people buying stuff unless it is celebrity endorsed.

Are you with a company that does better on mobile? E-commerce? Online to offline? I'm in e-commerce and Twitter has not been that effective for us (while Facebook has been fantastic).

Twitter's advantage is that companies already use the platform to broadcast things to followers. So "ads" are already inherently in the platform - but now they can pay money to broadcast those tweets to more than just people who follow them.

And it can be more targeted than something like Facebook because they can say "Show this ad to people who follow our competitors" (I have no idea if you can actually do this in the platform now, but I'm sure they are working on something like it). That is very powerful because those people presumably are in your market and since they follow your competitors they are welcome to seeing ad-like tweets in their timeline.

>> And it can be more targeted than something like Facebook because they can say "Show this ad to people who follow our competitors".

You can do exactly this on Facebook, and it is very effective. Twitter's ad platform is better built than Facebook, but targeting will likely always be better on Facebook because it simply has more information about users.

I would think Twitter would be able to better target ads to me based on who I follow and what I tweet. Based on the ads I've seen so far on Twitter, it seems like it's in its infancy. I don't "like" any businesses on FB because I only use FB for friends and family.

Also FB ads are so much more invasive. I am not the average user though.

Twitter ads only appear in your stream, which I at least keep very curated, since the volume people tweet can destroy it's value. I find Twitter ads much more intrusive. Also, go back through your likes (if you haven't). You'll be surprised how often stuff gets in there that you don't remember liking (you may be an exception and keep it very curated, most people do not). Facebook can target you based on any one of the pieces of information on your profile, which includes everything Twitter tracks, plus the additional fields. This doesn't even go into Partner Categories, which you cannot avoid being a part of, Custom Audiences from companies whose email list you are on, and Lookalike Audiences where you show up as similar to customers on another companies email lists (none of which Twitter offers). While you can target users on Twitter based on what they tweet about, something I don't believe Facebook offers yet, that is something that I would be shocked if Facebook doesn't roll it out. From my experience using both platforms, the one major targeting option Twitter offers that I'm not sure if Facebook is near being able to offer is sentiment analysis (you can target based on positive or negative feelings on a given topic). The only reason I lean towards assuming Twitter is ahead here is I know they have put resources into sentiment analysis.

Overall, the amount of targeting you can do on Facebook dwarfs Twitter, regardless of how atypical a user you are.

From my experience, anecdotal experience of others, the success of Mass Relevance, the day to day of my friends who work at Twitter, and my outsiders observations, Twitter's biggest revenue channel right now is partnerships with major media companies. Things like Twitter TV tweets and the rise of second screen viewing have done more for TV advertisers than anything else. In some cases, it's made non-sports become nearly DVR-proof. Networks love this, and so will support Twitter, in my opinion.

Damn, wish it were easier to get IPO shares as a retail investor... (then again Facebook fell on its face out of the gate, hard to gauge whether an IPO will have a huge pop on its first trading day).

Isn't the supposed purpose of an investment bank to properly value the company so that these massive IPO pops don't happen?

The fact that they happen at all means the banks are not good at what they do, or they do it on purpose so they can distribute wealth to their desired parties.

Ideally, yes. But they do undervalue so that there's more incentive for IPO investors to buy in. Value it too high, IPO investors won't bite, and the firm won't raise as much capital as they want.

The real story is that Twitter raised 1.8 billion in cash, the market is just a side-show.

Excellent point! Except the banks collude. Here's some evidence: http://blogs.reuters.com/felix-salmon/2011/06/07/the-us-ipo-...

Doesn't the fact that it popped $20 per share mean that they screwed up the price, and left money on the table from the initial chunk of stock sold?

Not necessarily. Only if the share price remains this high for the next month or so.

All shares "pop up" on the first day or so. The question is if investors are willing to continue to buy the stock at that rate.

> All shares "pop up" on the first day or so.

Unless the ticker is "FB"...

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