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I'm sorry, newbie to stocks, trading, etc here. Can someone explain how they IPOed at 26 dollars but somehow opened today at $45.10? Isn't today the first time

by skizm 13y ago

I'm sorry, newbie to stocks, trading, etc here. Can someone explain how they IPOed at 26 dollars but somehow opened today at $45.10? Isn't today the first time people can buy stock? Why did they not open at their IPO price? I guess I don't understand exactly what an IPO entails.

dragontamer 13y ago
Twitter does not sell directly on the exchanges. Instead, various big banks have purchased "first dibs" on the stock directly from Twitter. THEIR price was $26 a share. Now before you call this "unfair", remember that Facebook's IPO went downwards rather quickly, and is considered to be a failure. Banks definitely lost money by participating in Facebook's IPO, which IPOed at $38 and then fell to $20 for months. Its too early to call Twitter's IPO a success btw. Lets wait for a week, and see where the stock ends up. IPOs are extremely volatile.
- jaynos 13y ago
  Of course, if the banks held FB stock for sometime, they'd realize a profit based on todays price.
- astrodust 13y ago
  Remember what's a "failure" for banks is a "win" for people like Zuckerberg. Having a giant pop like this means you've left a lot of money on the table. If people were willing to pay $45 for Twitter shares and you sold them for $26, then you got ripped off. The ideal IPO price is one that doesn't rise or sink, meaning you nailed it.
  - dragontamer 13y ago
    Precisely. If Twitter IPOed at $40, they'd have $2.7 Billion instead of $1.8 Billion. Since Twitter set the bar too low, they're missing out on almost a billion in hard cash right now.
- skizm 13y ago
  Awesome. This is the step I was missing. Thanks.
- darkmighty 13y ago
  So basically by selling to banks the Twitter guys were betting that banks are either overvaluing the stock or predicting correctly the stock price. What makes them possibly think they have better knowledge of the market than the banks?
  - dragontamer 13y ago
    They don't. The only goal of Twitter guys was to get a whole bunch of money. Twitter has gotten $1.8 Billion out of this deal already. Once Twitter sells stock off to the banks, the money no longer reaches them. That said, if Twitter wants to sell additional stock at a later date on the public market, they'd prefer if the stock price were high.

by skizm 13y ago

dragontamer 13y ago

Twitter does not sell directly on the exchanges. Instead, various big banks have purchased "first dibs" on the stock directly from Twitter. THEIR price was $26 a share. Now before you call this "unfair", remember that Facebook's IPO went downwards rather quickly, and is considered to be a failure. Banks definitely lost money by participating in Facebook's IPO, which IPOed at $38 and then fell to $20 for months. Its too early to call Twitter's IPO a success btw. Lets wait for a week, and see where the stock ends up. IPOs are extremely volatile.

jaynos 13y ago
Of course, if the banks held FB stock for sometime, they'd realize a profit based on todays price.
astrodust 13y ago
Remember what's a "failure" for banks is a "win" for people like Zuckerberg. Having a giant pop like this means you've left a lot of money on the table. If people were willing to pay $45 for Twitter shares and you sold them for $26, then you got ripped off. The ideal IPO price is one that doesn't rise or sink, meaning you nailed it.
- dragontamer 13y ago
  Precisely. If Twitter IPOed at $40, they'd have $2.7 Billion instead of $1.8 Billion. Since Twitter set the bar too low, they're missing out on almost a billion in hard cash right now.
skizm 13y ago
Awesome. This is the step I was missing. Thanks.
darkmighty 13y ago
So basically by selling to banks the Twitter guys were betting that banks are either overvaluing the stock or predicting correctly the stock price. What makes them possibly think they have better knowledge of the market than the banks?
- dragontamer 13y ago
  They don't. The only goal of Twitter guys was to get a whole bunch of money. Twitter has gotten $1.8 Billion out of this deal already. Once Twitter sells stock off to the banks, the money no longer reaches them. That said, if Twitter wants to sell additional stock at a later date on the public market, they'd prefer if the stock price were high.