Twitter IPO soars past opening estimates

by | Nov 7, 2013 | Biz/Tech

By Peter Davey

Twitter on Thursday entered the market with an initial public offering, nearly seven years since the first tweet was sent in March 2006.

Opening at $45.10, stock prices surged to nearly $50 in early trading before settling back down to the opening price by noon.

The company closed at $44.90 per share on the NYSE.

Actor Sir Patrick Stewart and nine year old activist Vivienne Harr rang the bell at the New York Stock Exchange.

George Athanassakos, a professor of finance at the Ivey Business School in London, Ont., told Humber News that surges in share price at openings are common for hot companies like Twitter.

“This is what happens normally,” said Athanassakos. “People get too optimistic upfront and there is too much demand versus supply of the securities. In the first few days the stock jumps, but normally after that it goes down a bit.”

When Facebook went public in May 2012, its opening share price of $45 tumbled in the following months to a low of $18.27.

Wayne Atkinson, owner of Ontario SEO, a of London-based digital marketing company, told Humber News that Twitter shares the same problem Facebook had facing revenue.

“I think the challenge to them [Facebook] was that so many people were using it on mobile and I think Twitter will probably face a fair amount of the same challenges.”

Atkinson says that Twitter may be hampered by their late entrance to the mobile ad market, but has begun to address that concern..

“Its not like they’re the first one to come to mobile advertising. I think that is definitely going to be a challenge for them,” says Atkinson. “They do seem to be addressing it fairly aggressively, which Facebook didn’t do that well.”

After Facebook announced gains in advertising revenue in its 2013 second quarter results, its share price began to rise.

Those results showed that revenue had increased 61 per cent over the same quarter last year to $1.6 billion US. Of that amount, mobile ad revenue accounted for 41 per cent.

The future of Twitter is what many investors are banking on, as the company has yet to make a profit.

“They [analysts] look at other companies like Facebook and so on like Google and Yahoo and say ‘while this may happen to this company as well,'” said Athanassakos.

“They put a lot of faith I guess in potential and many times this backfires as in 2000 when they were putting in huge numbers to companies without revenues. At least Twitter has revenues.”

Even though Atkinson’s clients want a presence on Twitter, he says the company’s ads don’t match-up well to those of competitors, such as Google AdWords or Microsoft adCenter.

“A lot of companies suddenly get the ‘We need to get into Twitter,’ but the return on investment isn’t always there,” said Atkinson.

“We haven’t been particularly happy with Twitter.”