So much for a smooth flight: Twitter’s public debut hit some turbulence on day two.
The much-hyped Wall Street offering started Thursday, after Twitter lined up investors to sell 70 million shares at $26 a piece. Shares jumped in the opening minutes of trading to as high as $50, but that was as good as it gets.
Today, shares slipped to $41.65, proving yet again that IPOs are a tough play for regular investors who don’t get early access to shares at their opening price the way banking insiders do.
Anyone who bought shares through their brokers and online yesterday are sitting on a loss. Meanwhile, the banker buddies who locked in their share orders at the $26 offering price, are in the money for now.
While a number of headlines and talking heads have praised the Twitter offering, the Wall Street debut has not met the standards of a highly successful stock float.
First, Twitter raised about $1.8 billion by selling the shares at $26. That’s money it will use to invest in its business and employees.
With shares jumping immediately to $45 on the opening trade Thursday, that meant the company could have raised even more if it priced higher. It missed out on about $1 billion.
Also, the stock closed down Thursday from its highs during the day, and it lost more money Friday. Thus, the average Joe investor crowd is losing money on Twitter stock.
Wall Street watchers say that the three keys to a successful IPO: a company should raise money at the best value it can, its stock to rise at opening and then ideally, it should close even higher than that.
At $26 a share Twitter valued itself at up to $18.2 billion, depending on the share count used to calculate the market cap. At Friday’s closing of $41.65, Twitter’s market cap could approach $30 billion.
Many analysts have said that the company’s stock starts to look expensive to investors above even $30. Twitter has yet to turn a profit.
For now, analysts urge caution for everyday retail investors looking to score in an IPO.
“It’s tough for retail to buy here with so much flux,” one analyst said. “Maybe the stock settles out in a week.”