Twitter shares rocketed 85 per cent as they hit the New York Stock Exchange today, surging from $26 to $46 immediately and continuing on to hit the $50 dollar mark. Read our report here. Twitter shares finally hit the stock market today as increasing hype over the social media website's float saw the float price shift up again to $26. This follows Twitter having boosted the price range of its shares just days before its public listing, as high demand for shares overcame its fears of being caught by the spectre of the Facebook flop. The micro-blogging service that has helped topple governments, attract presidents and prime ministers and promote celebrities increased the share price range from $17 to $20, to $23 to $25, on Monday, echoing Facebook’s move up on the eve of its flotation in May 2012. Twitter, however, is hoping to dodge the market's bullets in a way Facebook failed to do.
Facebook increased its target price from $28 to $35 to $34 to $38 per share and suffered as it initially rose in value and then sunk. Silicon Valley and Wall Street are hoping for a decent float from Twitter, after the Facebook minor disaster. The value of Facebook dived in its first weeks of trading prompting criticism of its advisers, claims that investors were not given a true picture, and that there were too many shares on offer at too high a price. Facebook’s share price has since increased to around $49 but Twitter has taken steps to avoid an #epicfail. The social media service is listing on the New York Stock Exchange, under the ticker TWTR, rather than Nasdaq, which Facebook used. The NYSE has tested its systems to avoid any technical glitches which plagued the first day of Facebook’s Nasdaq listing. It has also sought to play down expectations and analysts suggest the shares are being priced at a level that could see them move up and stabilize.
Should I buy Twitter shares?
Twitter sold 70 million shares at $26 each, it said, raising a net $1.82bn. Including other stock, the price values the business at $18.1bn, according to Bloomberg. The company has more than 230million active users, sending 500million tweets a year and has been credited with helping break news and coordinate protests, as well as prompt defamation cases and slang such as #YOLO (you only live once). Brokers have been quick to point out that Twitter, unlike Facebook or Google, is yet to have made a profit. It made a loss of $69m in the first six months of 2013, after reporting revenue of $254m. Its plan to make money revolves around advertising to its huge number of users. But while Twitter has a direct line to their attention on computer screens, mobiles and tablets, it needs to balance promotions and the opportunity for targeting them with fears over invasion of privacy and intrusion. A report on the IPO published by Eagle Alpha, a firm specializing in curating internet opinion, found that this was a widely accepted attitude towards advertising. Its research showed there would be 'outrage’ if Twitter was to add more intrusive advertisements to the feed.
The same report also found rumors that the user experience may change as new features and partnerships are introduced, particularly around entertainment, television and e-commerce. Eagle Alpha’s report also looked into advertising customer perspectives ahead of the IPO and the self-serve ad platform has been criticised for its lack of user friendliness. With advertising being critical to Twitter’s revenue stream, this is an area in clear need of improvement and something the marketing and advertising industries will be watching closely.
How do technology stocks perform?
Many technology stocks such as Google and Facebook have become household names which helps boost their initially popularity but isn’t always sustainable. Analysis of previous technology and social media IPOs in the graph below by CMC Markets shows while shares have tended to get off to a strong start, initial gains in those chosen have not usually stuck around. The chart plots the change in the share price over the following 100 weeks. Within 30 weeks all but Google were underwater. Baidu and Linkedin then climbed back above IPO value, while Facebook took until 66 weeks to get back into the black and Zynga and Groupon have still not made it there. Colin Cieszynski, senior market analyst for CMC Markets, said it is important for traders to realize that opening day or even opening week success does not necessarily mean anything about the future prospects of the stock.
Written by Marc Shoffman
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