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Last updated: November 8, 2013 12:00 am
Shares in Twitter surged on its stock market debut on Thursday 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 billionaires as a result. At the closing price, Evan Williams, who invested the original capital, has a stake worth about $3.2bn while Jack Dorsey has a $1.3bn stake.
The stock closed up 73 per cent at $44.90, after hitting $50 at one point – or almost double its $26 offer price. At that level, Twitter was more valuable than market heavyweights such as Time Warner and Yahoo.
At the closing price, the San Francisco-based messaging platform was worth $31.1bn based on the fully diluted share count – far higher than the $18bn implied by the offer price and its $9bn valuation at the start of the year.
Professor Jay Ritter, a finance professor at the University of Florida, said the company could have raised another $1.3bn had it priced its shares at the level at which they closed on Thursday.
“They left more money on the table than all but three IPOs in US history,” he said. “Could Twitter have used another $1bn on its balance sheet? Certainly.”
But Twitter and its advisers had been anxious to avoid the runaway expectations and technical glitches that dogged Facebook’s IPO last year. Facebook’s shares rose just 0.6 per cent on its opening day before falling steadily for several months.
One banker not involved in the IPO added that media hype around Twitter had magnified the first day “pop” in its shares. “Retail buying is impossible to calibrate and may have driven the stock up an extra $10,” he said.
Twitter priced its shares at $26 each this week after lifting its indicative range from $17-$20 and then to $23-$25 on Monday. The $26 valuation roughly matched what it had traded at on private markets in September.
Some analysts 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, a Pivotal Research analyst who had been bullish on the stock, was the first to issue a “sell” note, arguing Twitter was “too expensive”. At $30bn Its enterprise value was close to established media groups such as CBS or the combined Publicis Omnicom Group, he noted.
Peter Garnry, head of equity strategy at Saxo Bank, said the valuation was “ridiculous”, disconnected from any logical calculation and presented a “huge downside risk” for investors if Twitter failed to meet expectations.
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 hotly sought-after technology listing, although as a percentage it was much less than was distributed to retail investors in the Facebook flotation.
Additional reporting by Richard Waters in San Francisco
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