Wall Street has been awaiting Twittermas for longer than a week now, like a kid anxious for Santa.
Twittermas is bringing presents. Nice ones. At a price of $26/share, the IPO should fetch Twitter (TWTR - Get Report) $1.8 billion. But that's for just 10% of the equity. Co-founder Evan Williams, who launched Blogger a decade ago, will become a billionaire. Another co-founder, Jack Dorsey, who has since helped found Square, should get a half-billion.
Now, is Twitter really worth more than Macy's (M) or Bed, Bath & Beyond (BBY)? Of course not. But that's not the point, my friend. The idea behind an IPO is to get as much as possible for the company selling the shares, and Goldman Sachs has run a clean, conservative road show, pushing all the buttons Wall Street likes to see pushed.
The idea is that the shares will leave the brokers who lined up early, like geeks outside a Mac store, and then go out to smaller investors at a premium. What happens after that is anyone's guess, and in some ways it doesn't matter, because the dealers will have all made their money by noon today.According to the amended S-1 filed last month, Twitter brought in $422 million in the first nine months of the year, 106% ahead of last year's $205 million, and seems on-pace to approach $600 million, mostly from ads of various kinds. The cost of that revenue is listed at $154 million, just 36% of the total. (TSLA), which started this year at less than $35 a share and is now trading - even after its recent fall -- at more than $150 a share. Both Tesla and Twitter will have similar market caps this morning, with Tesla expecting twice Twitter's revenue, and a gross profit for the nine months of about $300 million, which is currently more-than consumed by selling and research expenses to leave a net loss. fallen 14% yesterday for no reason other than a conservative outlook from management. If it has, it could quickly fall to about $60 a share, which would still be three times revenue and a fair price, given its market momentum. I consider it likely that a lot of former Tesla players are going to pile into Twitter today, hoping for the same kind of pop. They'll be running around like kids high on sugar at a Christmas party, getting on Santa Goldman's knee, and counting their profits long before they become real, visions of Teslas dancing in their heads. (AMZN) bubble, the PriceLine (PCLN) bubble, the Apple (AAPL) bubble, and the Google (GOOG) bubble have all yielded investments anyone would be proud to own. The Facebook (FB) bubble, which popped on its first day, is also on its way to becoming an investment. At some price, maybe not today's price but some price, I think Twitter and Tesla will do the same. At the time of publication the author owns 20 shares of GOOG, 70 shares of AAPL and dreams of getting a Tesla for Christmas, although it's more likely he'll get a tie. Follow @danafblankenhor This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts