Twitter IPO timing influenced by Facebook stock comeback

Sep 13, 2013 | Biz/Tech

By Josh McConnell and Brian O’Neill

Twitter’s filing for an initial public offering is strategically tied to the recovery of Facebook’s stock price, business experts said Friday.

Twitter announced its plans in a tweet late Thursday, saying the social media giant has “confidentially submitted an S-1 to the SEC for a planned IPO.”

With the news, observers began making comparisons to Facebook.

“First, you have to look at how markets were with Facebook,” Eric Kirzner, investment professor at University of Toronto’s Rotman School of Management, told Humber News. “There was a remarkable fall then a remarkable recovery.”

Facebook’s stock was priced at $38 when it hit the market on May 18, 2012 and declined to a low of $17.55 by Sept. 2012 before slowly turning around.

Now that Facebook’s stock has finally passed its original offering price, Kirzner says the time is right for Twitter to announce its intent for an initial public offering.

“Hopefully people will ask tougher questions this time.”

Though the timing of the decision to go public is as a good as any, Twitter still won’t likely file for its IPO until late this year or early 2014, says Peter Madott, an associate dean of the Business School at Humber College.

“I don’t know if there is a reason to rush,” says Madott. “They want to avoid the situation that happened with Facebook. The process of Facebook has been buy, watch it dive and then pray for a time for it to exceed its original cost.”

Twitter will have to analyze the market to determine whether overall investment confidence is high enough to support an IPO by the end of the year, says Madott.

However, those looking to make a quick buck off of Twitter’s IPO may want to reconsider as stocks will not be available for the average investor, says Kirzner. Stocks for Twitter will most likely be aimed at higher investors in primary markets, he says.

“If it becomes a hot stock, then retail investors will have to buy in the after market for a higher price than market value. So the main question is suitability: Who is the IPO aimed at?”

Twitter declined any further comment outside of its original tweet.