Updated from 11:56 a.m. ET to reflect closing share prices, Capital One ShareBuilder comment and data
NEW YORK (TheStreet) -- Twitter (TWTR) had a blockbuster first day of trading as a public company, after the micro-blogging site raised nearly $2 billion in capital in an initial public offering that valued the fast growing company in excess of $18 billion, when counting stock option grants.
Investors following the company's IPO process, which began with a Tweet in early October, weren't disappointing.
Twitter shares rose nearly 73% from its IPO pricing on Wednesday evening and accounted for a large portion the trading volume on the New York Stock Exchange (NYX).
Twitter shares closed at $44.90, up 72.69% from its IPO pricing of $26 a share. After its first day of trading, Twitter is now valued at roughly $24 billion, more than a majority of the companies in the S&P 500 Index.
In contrast to Facebook's (FB) blockbuster May 2012 listing, Twitter's IPO went off without any technical hitches, allowing for a scandal-free first day of trading.
Dan Greenshields, president of Capital One ShareBuilder, said Twitter stock trades accounted for about 50% of the online brokerage's volume on Thursday. Greenshields said in a telephone interview after the market close that Twitter's IPO also resulted in the Capital One ShareBuilder's highest daily trading volume of the year.
"I am very pleased. It is positive that the listing went off without a hitch," Greenshields added.
Twitter opened trading at $45.10 up over 70% from its IPO pricing, and well above levels most investors and analysts would recommend investors buy shares.
After reaching a share price in excess of $50 a share in early trading, Twitter closed down 20 cents for the day, meaning retail investors buying into the IPO weren't likely to capture much of Twitter's day-one stock surge. The company now has a bigger market capitalization than tech and media powerhouses like Sony (SNE) and Netflix (NFLX).
Some analysts now see reason for caution. Brian Wieser, an analyst with Pivotal Global Research downgraded Twitter to 'sell' given Twitter's opening share price. The analyst had initiated Twitter with a 'buy'rating and a $29 a share price target.
"At a $45 price level (the stock opened at $45.10), the enterprise value is approximately $30bn...or almost the same valuation as Discovery Communications, and nearly the same valuation as CBS or the combined Publicis Omnicom Group...or even Yahoo (some will argue that Yahoo's stake in Alibaba is worth this much, too)," Wieser wrote in a downgrade of Twitter to 'sell' based on a revised $30 a share price target.
Twitter's day-one close puts the company at a valuation multiple in-line with benchmarks analysts had expected the company to hit by the end of 2014. It indicates investors buying into Twitter's first day of trading should expect to be invested for the long-term.
Twitter's revenue has more than doubled to over $422 million through the first nine months of 2013 vs year-ago levels. As the company's revenue rises, hoverer, so are its losses. Nine months into the year, Twitter's net loss has risen to over $133 million from year-ago levels of $70.7 million.
Excluding stock-based compensation and accounting items like depreciation, Twitter has earned adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $30 million in 2013.
The company is growing revenue through paid advertising in 'Promoted Tweets' and 'Promoted Accounts,' in addition to some sales from the company's data licensing business. Overall, Twitter generates over 80% of its revenue from advertising. Analyst Opinions: SunTrust Robinson Humphrey analyst Robert S. Peck reiterated a "buy" recommendation on Twitter shares in a November 4 client note. The analyst set a year-end 2014 price target of $50 a share for Twitter, predicated on a share multiple of 17 times Twitter's forward sales. RBC Capital Markets analyst Mark Mahaney gave the burgeoning internet powerhouse a 12-month price target of $33 a share, in a report on Wednesday initiating his coverage of Twitter's stock. Sterne Agee & Leach analyst Arvind Bhatia value Twitter shares at between $25 and $32 over the next 12 to 24 months. The analyst gave goalposts on Twitter's stock price contingent on its earnings execution. In the upside case, shares could be worth $33 to $48 while in the downside case, shares could be worth $13 to $15 during the same period, Bhatia said in a valuation that indicates little upside to Twitter's current IPO price. S&P Capital IQ analyst Scott Kessler valued Twitter at between $11.3 billion to $13.7 billion, below where Twitter valued itself in its initial pricing range, in his Oct. 29 initiation of coverage. "Our valuation assessment reflects the considerable risks we see related to some confusion about Twitter's offerings and their appeal, a number of larger and comparably positioned competitors, indications of decelerating growth in users and engagement, significant operating and net losses we see through 2014, and our view of somewhat lacking corporate governance," Kessler wrote. Reaping Riches: Co-founder Evan Williams became a billionaire on paper after Twitter's IPO. According to filings with the Securities and Exchange Commission, Williams will own 10.4% of Twitter's outstanding shares, a holding worth roughly $2.55 billion, based on Twitter's closing share price of $44.90. Jack Dorsey, another co-founder, became an unexpected Twitter billionaire after the company's first day of trading. Dorsey's Twitter holding was valued at $609 million before the company's first trades, and grew to $1.05 billion by the end of the day. Dorsey is already a paper billionaire given previous investments and reports that his newest venture, Square, is being valued at $4.5 billion.
Dick Costolo, Twitter's CEO, holds a stake worth nearly $341 million, according to closing share prices. Twitter's largest shareholders also include venture capital firms Rizvi Traverse, Spark Capital, Benchmark Capital Partners, Union Square Ventures and DST Global. JPMorgan Chase (JPM) will also have a 9% holding in Twitter shares after the firm's IPO, filings show. Jim Cramer: Jim Cramer, founder of Thestreet, has set some hard and fast rules for investors given his expectation that this will, indeed, be a hot IPO. Cramer believes Twitter has a path toward revenue growth and profitability that investors can trust, however, at some point investors may need to draw a line on valuation. Investors should balk at Twitter shares at a market capitalization of over $20 billion, Cramer said on Wednesday. He cautioned investors from buying Twitter shares in the after-market or at a price higher than $28. That valuation balances the company's expected potential and accounts for Twitter's still uncertain share count. Twitter's IPO includes a 30-day option for underwriters to purchase 10.5 million additional shares in the company. The Underwriters:
Goldman Sachs (GS) led the offering. Goldman banker Anthony Noto took to Twitter to exclaim 'Phew!' after the company opened trading at $45.10 a share. Whether or not Twitter priced its IPO correctly or left money on the table is up for debate.
Morgan Stanley (MS), JPMorgan (JPM), Bank of America (BAC), Deutsche Bank acted as co-book runners, while Code Advisors and Allen & Co. co-underwrote the offering. The Chicago Board of Options Exchange said on Wednesday that option contracts for the company's stock will be available Nov. 15. -- Written by Antoine Gara in New York Follow @antoinegara
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