The big social media and financial news this week was the Twitter IPO (Initial Public Offering) which seems to have been quite a success for the social networking service.
Twitter started trading shares to the public on Thursday (November 7th, 2013) and opened at $45.13 per share. This was a 73% gain from the $26 per share that was offered to insiders and existing shareholders on Wednesday, the day before the IPO. Early reports projected TWTR, the stock ticker symbol Twitter is listed under, to list around $35.
Twitter shares reached a high of trading at $50.09 during the Thursday, the first day of trading. However, on Friday the shares slipped back down to under $45 and as of this writing the stock current sit at $41.65 per TWTR share.
Even if the shares pulled back Friday the Twitter IPO gave the social media company a huge boost in it's market capitalization. How much? About $25 billion along with the surging stock of course this fluctuates with the stock price. It currently sits at under $20 billion. This still means Twitter has a bigger valuation than a lot of S&P500 companies. The real question, is that a fair valuation for Twitter?
By all accounts Twitter is a poster child for a successful technology and social media company. Twitter has roughly 100 million active users each day and over 230+ million accounts. (Probably about 10%-15% of those accounts are bots though.) Users create 500 million Tweets each day sharing thoughts to the world in 140 characters or less.
Twitter's numbers are quite impressive but the microblogging service has yet to find a great way to make, you know… money. Currently the best way Twitter is pulling in cash is Promoted Tweets and Trends. Companies can pay to show Tweets to users they believe will find them of value and try to promote a hashtag trend they want to get noticed. The company has also toyed with different ways to make money but a lot of those are not worth mentioning. The Twitter IPO helped raise cash too.
Everyone it seems uses Twitter from journalists, celebrities, athletes, politicians, etc. Warren Buffet even has a Twitter account but he doesn't actively Tweet. Still Twitter is seen as an important tool in the web 2.0 world.
It should be noted that TWTR listed on the New York Stock Exchange (NYSE) and not the NASDAQ which is where most tech and social media companies are listed. Does that means the executives and founders of Twitter view it differently?
Whatever Evan Williams and Jack Dorsey think they are probably pretty happy since they added a significant amount to their personal wealth. It should be noted these two and did not offer any of their shares for sale. None of the banks underwriting the IPO Goldman Sachs, Morgan Stanley, and JPMorgan Chase, decided to sell shares as well.
The general belief seems to be even if Twitter is not making money now, they will figure it out eventually. A lot of people are still joining and starting to use the service and a majority of users use the social network on smartphones. Twitter still could lose ground and users just like Facebook is experiencing now. Remember my article asking “Is Facebook for Old People Now?” Could the same thing happen to Twitter?
I was annoyed that they stopped support of TweetDeck Mobile apps and I haven't been happy with other decisions Twitter has made. Overall they've done a good job of making the Twitter API easy for developers to build on and make 3rd party Twitter clients and applications which has helped fuel growth.
Liking a social media service is different than investing in it though. Would you invest in Twitter with your personal money? Do you believe the Twitter IPO was successful? Do you think you would wait until the TWTR comes down? What do you see in Twitter's future?