By FT
Shares in Twitter surged on its stock market debut Friday as investors buying into this year’s most anticipated technology flotation valued the company at more than $30bn.
At least two of the company’s co-founders – who started Twitter almost by accident in 2006 – are now billionaires. Evan Williams, who invested the original capital, now has a stake worth $3.2bn while Jack Dorsey has a stake of $1.3bn.
The stock shot up 74 per cent on the open to $45.10 and hit $50 at one point – almost double its $26 offer price. At that price, Twitter was more valuable than heavyweights such as Time Warner and Yahoo. Twitter had a more successful debut than Facebook, which suffered from trading glitches on the Nasdaq; its shares rose just 0.6 per cent on the opening day before falling steadily for the next few months. LinkedIn almost doubled in value on its first day of trading in 2011.
At the opening price of $45.10, the San Francisco-based messaging platform was worth $31.2bn based on the fully diluted share count – far above the $18bn implied by the offer price and the $9bn it was worth at the start of the year.
Some observers questioned how an unprofitable company could be given a market capitalisation of almost a quarter of Facebook’s despite having just 8 per cent of its revenues.
Brian Wieser, an analyst at Pivotal Research who had been bullish on the stock, was the first to issue a “sell” note on the stock, arguing that it was “too expensive”.
Peter Garnry, head of equity strategy at Saxo Bank, said the valuation was “ridiculous”.
On Wednesday night, Mary Jo White, chair of the Securities and Exchange Commission, warned that technology companies with many users would not always translate them into large profits.
Twitter had tried to keep a cap on expectations in an attempt to avoid the runaway expectations and technical glitches that dogged Facebook’s public offering last year.
Initially, it indicated a low price range of $17 to $20 a share and even when the price crept up, it hit only $26, the price it had previously been trading on the secondary market.
Dick Costolo, chief executive, said the company would now invest in areas such as TV partnerships and international expansion, adding: “We will continue to make those investments as long as we see tremendous growth.”
Retail investors received about 10 per cent of the shares, according to people close to the situation.
Bankers said that amount was normal for a hot technology listing, although as a percentage it was much less than was distributed to retail investors in the Facebook flotation.