Twitter worth $25bn on NYSE launch
Company has yet to make a profit on annual revenues of $600 million
Twitter co-founders Jack Dorsey (L), Biz Stone and Evan Williams (R) speak after the Twitter Inc. IPO on the floor of the New York Stock Exchange in New York.
Shares in social-messaging website Twitter soared 73 per cent in value on their stock market debut in New York yesterday, pushing the market worth of the company to $25 billion (€19 billion).
Trading on the New York Stock Exchange under the ticker TWTR, the share price surged to $45.10 a share from a flotation price of $26 a share when the company began trading in a frenzy of activity after a glitzy launch on the public market, the biggest IPO of a technology company since social media website Facebook was floated in May 2012.
Approaching the market close in mid-afternoon trading yesterday, the company was trading up 83 per cent at more than $47 a share following the second biggest ever flotation of a technology company.
Despite never having made a profit on annual revenues that will total $600 million this year, the seven-year-old company’s share price soared as investors sought 30 times the number of shares on offer as they bet on the potential growth in the company, ignoring the loss-making track record of the business.
The opening price valued Twitter’s shares at more than 40 times the company’s annual revenues, well in excess of the multiples enjoyed by social media rivals Facebook and LinkedIn, prompting calls that the company mispriced the flotation and that the share sale marked another bubble for technology stocks.
The demand for the shares, on a day when other technology stocks fell sharply, gave the company a higher market value than online broadcaster Netflix, supermarket chain Whole foods and airline Delta.
The first-day performance signals that investors are betting that the company can make considerably more money from advertising revenue from the 230 million people, including heads of state, Hollywood celebrities and sports stars who post 140-character “tweet” messages.
The company, which avoided the problems that plagued Facebook’s stock market debut, was in line to raise at least $1.8 billion from the sale of 70 million shares. More than 100 million shares were traded.
Twitter executives, including founder Jack Dorsey and chief executive Dick Costolo, were joined on the floor of the Wall Street exchange by British actor Patrick Stewart to mark the flotation of the company.
Stewart was invited along with nine-year-old Vivienne Harr, who started a charity to end childhood slavery through Twitter, and a Boston Police Department representative to the launch as prominent users.
Twitter said it owed its success to users like these before sending a simple follow-up tweet to mark the opening bell on the company’s first day as a publicly traded company that said: “#Ring!”
“I guess I represent the poster boy for Twitter,” Stewart told Reuters, adding that he would not be buying any Twitters shares.
The 5 per cent stake in Twitter held by Dorsey, who dreamt up the idea for the website while at New York University, is worth about $500 million. Costolo’s shares are worth about $350 million.
The high share price recorded on the back of a feverish launch failed to convince some.
“Opening at $45/share? Almost 50x revenues! We are official in another tech bubble,” said Steve Rattner, the Wall Street financier who advised President Obama on the bailout of the US motor industry, in a tweet.
Financial analyst Brian Wieser of independent research firm Pivotal Research advised clients to sell the shares, telling them that Twitter was “simply too expensive”.
The company would have to generate more than $6 billion in annual revenues by 2018 to justify the post-launch price of $45 a share, he said.
The company, which plans to employ more than 200 people at its European headquarters in Dublin by the end of next year, lost $69 million on revenues of $253 million in the first six months of a year.