6 ms·

Twitter Prices IPO Above Estimates at $26 Per Share, Valuation Up to $18B

42 points by McKittrick 13y ago

AsymetricCom 13y ago
I'm anticipating a fall to the more realistic $14 immediately after open, similar to FB. What I'm actually doing is something completely illogical.
- recuter 13y ago
  Yep, time after time I carefully plot out a short and don't have the balls to go through with it. I've lost millions on paper at this point. :) Sigh. :(
  - tansey 13y ago
    You can't short an IPO...
    - sarreph 13y ago
      Not immediately, but you could probably find an entity to borrow them off, pretty quickly. I wouldn't have thought it would affect the overall shorting effect too much either. http://www.investopedia.com/ask/answers/05/062905.asp http://www.investopedia.com/ask/answers/05/062905.asp
downandout 13y ago
An $18 billion valuation for a company with dramatically accelerating losses, currently at the rate of over $20M per month. What could possibly go wrong there?
- cylinder 13y ago
  Valued the same as Tesla. Is there anyone here who would rather own Twitter instead of Tesla five years from now?
  - downandout 13y ago
    Personally, I would shy away from both of them. If you really want to be in one of these companies, at least Facebook has earnings and scale. I've never liked twitter and get no value out of it, so perhaps I'm the wrong guy to ask, but I suspect Twitter is headed the way of MySpace.
    - encoderer 13y ago
      While I think you're quite wrong about the MySpace comparison, I also agree that FB is the safest social media play.
      - 7Figures2Commas 13y ago
        I don't think the use of the word "safe" or any derivative of it is appropriate with the shares of any publicly-traded social media company. That said, even though Twitter's valuation looks quite rich at $26/share from a financials perspective (to say the least), I think some investors who have (or want) positions in social media companies are considering Twitter's demographic profile, which also happens to be Facebook's biggest potential Achilles heel. The fact that Twitter is seen by some as a benefactor of Facebook's growing teen attrition may not be a wise rationale for a Twitter investment, but if you're hell bent on taking a cruise on the Titanic, why not rearrange the deck chairs to get yourself a view that's more to your liking?
        encoderer 13y ago
        It is, of course, not a mutually exclusive situation. But to your point about demos, if you look at the data it paints a different picture than what you've suggested. As an investor in FB (not that that makes me special) I read the Piper Jaffrey report that I presume you're citing. What it overlooks is that FB owns Instagram. Where FB is weak demographically, Instagram is strong. Moreover, FB's value has never been strength among the youngest demographic. Sure, hooking a user early is great but hardly the only path to acquisition. Just ask my mom. Or, probably, your own. And feel free to use whatever language you want. I stand by what I said.
- volida 13y ago
  what's your data for said accelerating losses?
  - downandout 13y ago
    "But for all its power and reach, Twitter gushes losses — $65 million in the third quarter, nearly three times more than it lost a year ago." http://triblive.com/business/headlines/5012201-74/twitter-company-investors#axzz2jupRudWw http://triblive.com/business/headlines/5012201-74/twitter-co...
- prezjordan 13y ago
  $1.8 billion. 70 million shares at $26 a piece. Am I missing something?
  - mjackson 13y ago
    They're selling 70M shares, aiming to raise approx. $1.8B. However, there are over 700M fully diluted shares. At $26 a piece this makes a total valuation of $18B.
    - prezjordan 13y ago
      Ah, thank you for clarifying!
- pbreit 13y ago
  Really? You're going to trot out the age-old HN aversion to loss-making? It's time for HNers to learn that ambitious companies that know how to invest resources SHOULD be making losses. IPOs are fundraising events. The capital is expected to be invested into the business to drive further growth. When companies lose the ability to invest at acceptable returns, then you might see them shift the balance to profit-making.
danhak 13y ago
It really baffles me why the share price is reported as if it means anything at all on its own.
- adwf 13y ago
  It's reported because the other big tech IPO recently was Facebook, which went from ~$40 down to ~$20, back up to ~$50. They're trying to provide a reference point to the other major social networking company on the stock market. Of course anyone with a bit of sense knows that it's not the individual share price that matters; but with something as famous as Twitter, that is not necessarily who you are marketing the IPO at.
- encoderer 13y ago
  It baffles you? Sure, the price doesn't matter much to a retail investor. But millions of shares will be bought tomorrow at that price so it certainly means something to the right people.
  - danhak 13y ago
    Which headline do you think is more informative to TechCrunch's audience? Twitter Prices IPO At $26 Per Share or Twitter Prices IPO At $18 Billion Valuation
    - afterburner 13y ago
      Both are useful and necessary.
      - edias 13y ago
        Yes, they are both useful and relevant when used in combination but alone stock price is pretty meaningless. Before Berkshire Hathaway issued a stock split (1 share becomes 2 or more shares) a share was worth ~$172,000. Today Apple trades at $520 and MSFT at $38. Alone those numbers are of no use. You don't know how much the actual company is worth. Share price * share volume = Market Cap. You need to know at least two of those values to make an informed decision.
encoderer 13y ago
The market conditions this past week or so have been rough on tech stocks. I'm sure it's not what Twitter management would consider ideal, but pulling an IPO is a very drastic move. As is, anything could happen tomorrow.
- afterburner 13y ago
  Maybe all the tech stock fans are cashing out in preparation to sink it all into Twitter...
  - encoderer 13y ago
    Ok, maybe? But do you really think that's what's happening? More likely, I think a generally underwhelming earnings season has deflated a few of these momo stocks.
    - afterburner 13y ago
      I actually do suspect that's what's happening, yes.
      - encoderer 13y ago
        I think that's a little naive. The market cap of twitter does not make up for the losses in tech over the last 2-3 weeks. And that's as-if there is no new money in the game, that to buy one stock you have to sell the rest. Which means paying taxes. Not for macro reasons but JUST to buy a new offering? Twitter is not the only big IPO. There is no pattern of market turndown in the lead up to an IPO. The whole idea is a bit silly to me.
        afterburner 13y ago
        2-3 weeks? I was thinking just the day or two before actually, and only the handful of really popular tech stocks. Thanks for your patronizing put down though.
hippy11 13y ago
Twitter IPOs at $26/share with 700 million shares. Facebook ipo'ed at $38/share with 2.55 billion shares. Mathematically, Twitter's IPO is about 1/4 the value of Facebook. Twitter has 200 million active users Facebook has 1.15 billion active users I don't think twitter is worth 1/5 the market cap of Facebook. It doesn't have photo albums, groups, calendars, events that facebook does, and twitter still has a long way to go for mobile. Most of my friends uses a third party tweet client (like tweetbot) and don't even have twitter's app installed. Therefore, I think Twitter is very much overpriced. Did I miss something? https://blog.twitter.com/2013/celebrating-twitter7 https://blog.twitter.com/2013/celebrating-twitter7 http://thenextweb.com/facebook/2013/07/24/facebook-users-q2-2013/ http://thenextweb.com/facebook/2013/07/24/facebook-users-q2-...
- encoderer 13y ago
  Yes. First, the IPO is 18% as big as Facebooks, not 25%. Second, if Twitter closes at this $26 share tomorrow, it will have a market cap about 15% the size of Facebook.
- tobyjsullivan 13y ago
  It would be better to consider Facebook's monthly active users at the time of their IPO. The breakdown looks more like this: Facebook at IPO: MAU: $845M [1], Valuation: $104B [1], Value/User = $123 Facebook Today: MAU: 1.15B [2], Valuation: $120B [3], Value/User = $104 Twitter at IPO: MAU: 218M [4], Valuation: $18.1B [5], Value/User = $83 [1] http://en.wikipedia.org/wiki/Initial_public_offering_of_Facebook http://en.wikipedia.org/wiki/Initial_public_offering_of_Face... [2] http://thenextweb.com/facebook/2013/07/24/facebook-users-q2-2013/ http://thenextweb.com/facebook/2013/07/24/facebook-users-q2-... [3] https://www.google.ca/finance?q=NASDAQ:FB https://www.google.ca/finance?q=NASDAQ:FB [4] http://techcrunch.com/2013/10/03/blindtweeting/ http://techcrunch.com/2013/10/03/blindtweeting/ [5] http://techcrunch.com/2013/11/06/twitter-prices-ipo-at-26-per-share/ http://techcrunch.com/2013/11/06/twitter-prices-ipo-at-26-pe...
  - AsymetricCom 13y ago
    Wallstreet is insane if it thinks Twitter is making $80 a user in the lifetime of the company.
aaronbrethorst 13y ago
In case you're curious, the lockup expiration will happen 180 days after IPO, or May 6, 2014. I already added a note to my calendar.
- j10t 13y ago
  What is expected to happen when the lockup expires? My guess is that the price drops because of so many employees selling at once, but I don't pretend to understand finance.
  - aaronbrethorst 13y ago
    Right, exactly, it's a supply and demand thing. You have X shares trading on the market, and all of a sudden you have something like 3 or 4 * X shares trading hands. Unless there are, all of a sudden, a commensurate number of new share purchasers, it'll drive the price down.
- downandout 13y ago
  By then, the market will have priced in the lockup expiration. It should, but is most certainly not, doing it at the IPO.
  - aaronbrethorst 13y ago
    Totally disagree: http://aswathdamodaran.blogspot.com/2012/11/much-ado-about-liquidity-lockup.html?m=1 http://aswathdamodaran.blogspot.com/2012/11/much-ado-about-l...
- MichaelGG 13y ago
  What are you expecting at that point? FB's major lockup expiration (Nov 14 2012) was preceded by a dip a few days prior (not the lowest price in the previous few weeks though) and then went up on the lockup date. Are you expecting a similar drop as news articles go out about the pending lockup a week/days before, followed by it going up after some people realise everyone knew about this all along?
ahsanhilal 13y ago
Twitter 2007: Who wants to post status messages which are limited to 140 characters Twitter 2010: Who wants to invest in a company which limits status messages to 140 characters Twitter 2013: Who thinks $26/share is a viable price for a company which limits what people say to 140 characters, has no photo albums, events and all of facebook's features (hint: Twitter is not Facebook)
- corford 13y ago
  That's all fine and dandy but the proof of the pudding lies in a successful monetization strategy. From where I'm sitting, I just can't see how they're ever going to convince enough people to pony up (directly or indirectly) for what is, at its core, an artificially constrained public sms service (that thus far they've been accustomed to using for free).
  - jessedhillon 13y ago
    What? People already pay to advertise on the service, the convincing is happening right now.
    - corford 13y ago
      In a sane world I don't think there will be enough of them to stem the losses and deliver a solid return on an IPO that values the company in the double digit billions. Happy to be wrong but only time will tell.
- MichaelGG 13y ago
  >Who thinks $26/share is a viable price Depends on how many shares exist, doesn't it? A year ago, MSFT was near $26/share. That number is meaningless by itself.

42 points by McKittrick 13y ago

I'm anticipating a fall to the more realistic $14 immediately after open, similar to FB. What I'm actually doing is something completely illogical.

recuter 13y ago
Yep, time after time I carefully plot out a short and don't have the balls to go through with it. I've lost millions on paper at this point. :) Sigh. :(
- tansey 13y ago
  You can't short an IPO...
  - sarreph 13y ago
    Not immediately, but you could probably find an entity to borrow them off, pretty quickly. I wouldn't have thought it would affect the overall shorting effect too much either. http://www.investopedia.com/ask/answers/05/062905.asp http://www.investopedia.com/ask/answers/05/062905.asp

downandout 13y ago

An $18 billion valuation for a company with dramatically accelerating losses, currently at the rate of over $20M per month. What could possibly go wrong there?

cylinder 13y ago
Valued the same as Tesla. Is there anyone here who would rather own Twitter instead of Tesla five years from now?
- downandout 13y ago
  Personally, I would shy away from both of them. If you really want to be in one of these companies, at least Facebook has earnings and scale. I've never liked twitter and get no value out of it, so perhaps I'm the wrong guy to ask, but I suspect Twitter is headed the way of MySpace.
  - encoderer 13y ago
    While I think you're quite wrong about the MySpace comparison, I also agree that FB is the safest social media play.
    - 7Figures2Commas 13y ago
      I don't think the use of the word "safe" or any derivative of it is appropriate with the shares of any publicly-traded social media company. That said, even though Twitter's valuation looks quite rich at $26/share from a financials perspective (to say the least), I think some investors who have (or want) positions in social media companies are considering Twitter's demographic profile, which also happens to be Facebook's biggest potential Achilles heel. The fact that Twitter is seen by some as a benefactor of Facebook's growing teen attrition may not be a wise rationale for a Twitter investment, but if you're hell bent on taking a cruise on the Titanic, why not rearrange the deck chairs to get yourself a view that's more to your liking?
      - encoderer 13y ago
        It is, of course, not a mutually exclusive situation. But to your point about demos, if you look at the data it paints a different picture than what you've suggested. As an investor in FB (not that that makes me special) I read the Piper Jaffrey report that I presume you're citing. What it overlooks is that FB owns Instagram. Where FB is weak demographically, Instagram is strong. Moreover, FB's value has never been strength among the youngest demographic. Sure, hooking a user early is great but hardly the only path to acquisition. Just ask my mom. Or, probably, your own. And feel free to use whatever language you want. I stand by what I said.
volida 13y ago
what's your data for said accelerating losses?
- downandout 13y ago
  "But for all its power and reach, Twitter gushes losses — $65 million in the third quarter, nearly three times more than it lost a year ago." http://triblive.com/business/headlines/5012201-74/twitter-company-investors#axzz2jupRudWw http://triblive.com/business/headlines/5012201-74/twitter-co...
prezjordan 13y ago
$1.8 billion. 70 million shares at $26 a piece. Am I missing something?
- mjackson 13y ago
  They're selling 70M shares, aiming to raise approx. $1.8B. However, there are over 700M fully diluted shares. At $26 a piece this makes a total valuation of $18B.
  - prezjordan 13y ago
    Ah, thank you for clarifying!
pbreit 13y ago
Really? You're going to trot out the age-old HN aversion to loss-making? It's time for HNers to learn that ambitious companies that know how to invest resources SHOULD be making losses. IPOs are fundraising events. The capital is expected to be invested into the business to drive further growth. When companies lose the ability to invest at acceptable returns, then you might see them shift the balance to profit-making.

danhak 13y ago

It really baffles me why the share price is reported as if it means anything at all on its own.

adwf 13y ago
It's reported because the other big tech IPO recently was Facebook, which went from ~$40 down to ~$20, back up to ~$50. They're trying to provide a reference point to the other major social networking company on the stock market. Of course anyone with a bit of sense knows that it's not the individual share price that matters; but with something as famous as Twitter, that is not necessarily who you are marketing the IPO at.
encoderer 13y ago
It baffles you? Sure, the price doesn't matter much to a retail investor. But millions of shares will be bought tomorrow at that price so it certainly means something to the right people.
- danhak 13y ago
  Which headline do you think is more informative to TechCrunch's audience? Twitter Prices IPO At $26 Per Share or Twitter Prices IPO At $18 Billion Valuation
  - afterburner 13y ago
    Both are useful and necessary.
    - edias 13y ago
      Yes, they are both useful and relevant when used in combination but alone stock price is pretty meaningless. Before Berkshire Hathaway issued a stock split (1 share becomes 2 or more shares) a share was worth ~$172,000. Today Apple trades at $520 and MSFT at $38. Alone those numbers are of no use. You don't know how much the actual company is worth. Share price * share volume = Market Cap. You need to know at least two of those values to make an informed decision.

encoderer 13y ago

The market conditions this past week or so have been rough on tech stocks. I'm sure it's not what Twitter management would consider ideal, but pulling an IPO is a very drastic move. As is, anything could happen tomorrow.

afterburner 13y ago
Maybe all the tech stock fans are cashing out in preparation to sink it all into Twitter...
- encoderer 13y ago
  Ok, maybe? But do you really think that's what's happening? More likely, I think a generally underwhelming earnings season has deflated a few of these momo stocks.
  - afterburner 13y ago
    I actually do suspect that's what's happening, yes.
    - encoderer 13y ago
      I think that's a little naive. The market cap of twitter does not make up for the losses in tech over the last 2-3 weeks. And that's as-if there is no new money in the game, that to buy one stock you have to sell the rest. Which means paying taxes. Not for macro reasons but JUST to buy a new offering? Twitter is not the only big IPO. There is no pattern of market turndown in the lead up to an IPO. The whole idea is a bit silly to me.
      - afterburner 13y ago
        2-3 weeks? I was thinking just the day or two before actually, and only the handful of really popular tech stocks. Thanks for your patronizing put down though.

hippy11 13y ago

Twitter IPOs at $26/share with 700 million shares. Facebook ipo'ed at $38/share with 2.55 billion shares. Mathematically, Twitter's IPO is about 1/4 the value of Facebook. Twitter has 200 million active users Facebook has 1.15 billion active users I don't think twitter is worth 1/5 the market cap of Facebook. It doesn't have photo albums, groups, calendars, events that facebook does, and twitter still has a long way to go for mobile. Most of my friends uses a third party tweet client (like tweetbot) and don't even have twitter's app installed. Therefore, I think Twitter is very much overpriced. Did I miss something? https://blog.twitter.com/2013/celebrating-twitter7 https://blog.twitter.com/2013/celebrating-twitter7 http://thenextweb.com/facebook/2013/07/24/facebook-users-q2-2013/ http://thenextweb.com/facebook/2013/07/24/facebook-users-q2-...

encoderer 13y ago
Yes. First, the IPO is 18% as big as Facebooks, not 25%. Second, if Twitter closes at this $26 share tomorrow, it will have a market cap about 15% the size of Facebook.
tobyjsullivan 13y ago
It would be better to consider Facebook's monthly active users at the time of their IPO. The breakdown looks more like this: Facebook at IPO: MAU: $845M [1], Valuation: $104B [1], Value/User = $123 Facebook Today: MAU: 1.15B [2], Valuation: $120B [3], Value/User = $104 Twitter at IPO: MAU: 218M [4], Valuation: $18.1B [5], Value/User = $83 [1] http://en.wikipedia.org/wiki/Initial_public_offering_of_Facebook http://en.wikipedia.org/wiki/Initial_public_offering_of_Face... [2] http://thenextweb.com/facebook/2013/07/24/facebook-users-q2-2013/ http://thenextweb.com/facebook/2013/07/24/facebook-users-q2-... [3] https://www.google.ca/finance?q=NASDAQ:FB https://www.google.ca/finance?q=NASDAQ:FB [4] http://techcrunch.com/2013/10/03/blindtweeting/ http://techcrunch.com/2013/10/03/blindtweeting/ [5] http://techcrunch.com/2013/11/06/twitter-prices-ipo-at-26-per-share/ http://techcrunch.com/2013/11/06/twitter-prices-ipo-at-26-pe...
- AsymetricCom 13y ago
  Wallstreet is insane if it thinks Twitter is making $80 a user in the lifetime of the company.

aaronbrethorst 13y ago

In case you're curious, the lockup expiration will happen 180 days after IPO, or May 6, 2014. I already added a note to my calendar.

j10t 13y ago
What is expected to happen when the lockup expires? My guess is that the price drops because of so many employees selling at once, but I don't pretend to understand finance.
- aaronbrethorst 13y ago
  Right, exactly, it's a supply and demand thing. You have X shares trading on the market, and all of a sudden you have something like 3 or 4 * X shares trading hands. Unless there are, all of a sudden, a commensurate number of new share purchasers, it'll drive the price down.
downandout 13y ago
By then, the market will have priced in the lockup expiration. It should, but is most certainly not, doing it at the IPO.
- aaronbrethorst 13y ago
  Totally disagree: http://aswathdamodaran.blogspot.com/2012/11/much-ado-about-liquidity-lockup.html?m=1 http://aswathdamodaran.blogspot.com/2012/11/much-ado-about-l...
MichaelGG 13y ago
What are you expecting at that point? FB's major lockup expiration (Nov 14 2012) was preceded by a dip a few days prior (not the lowest price in the previous few weeks though) and then went up on the lockup date. Are you expecting a similar drop as news articles go out about the pending lockup a week/days before, followed by it going up after some people realise everyone knew about this all along?

ahsanhilal 13y ago

Twitter 2007: Who wants to post status messages which are limited to 140 characters Twitter 2010: Who wants to invest in a company which limits status messages to 140 characters Twitter 2013: Who thinks $26/share is a viable price for a company which limits what people say to 140 characters, has no photo albums, events and all of facebook's features (hint: Twitter is not Facebook)

corford 13y ago
That's all fine and dandy but the proof of the pudding lies in a successful monetization strategy. From where I'm sitting, I just can't see how they're ever going to convince enough people to pony up (directly or indirectly) for what is, at its core, an artificially constrained public sms service (that thus far they've been accustomed to using for free).
- jessedhillon 13y ago
  What? People already pay to advertise on the service, the convincing is happening right now.
  - corford 13y ago
    In a sane world I don't think there will be enough of them to stem the losses and deliver a solid return on an IPO that values the company in the double digit billions. Happy to be wrong but only time will tell.
MichaelGG 13y ago
>Who thinks $26/share is a viable price Depends on how many shares exist, doesn't it? A year ago, MSFT was near $26/share. That number is meaningless by itself.