Twitter Inc shares jumped 73% in a frenzied trading debut that drove the seven-year-old company's market value to around $25 bln and evoked the heady days of the dot-com bubble.
The strong performance on Thursday is encouraging for the venture capitalists who have backed other consumer Web startups, such as Square or Pinterest, though it sounded alarm bells for some investors who cautioned that the froth was unwarranted.
"@twitter opening at $45/share? Almost 50x revenues! We are officially in another tech bubble," tweeted financier and investment advisor Steve Rattner.
The stock closed its first day of trade on the New York Stock Exchange at $44.90 a share after hitting a session-high of $50, nearly double the initial public offering price of $26 set late on Wednesday.
Twitter could raise $2.1 bln if an underwriters' over-allotment is exercised, as expected, making it the second largest Internet offering in the U.S. behind Facebook's $16 bln IPO last year and ahead of Google 's 2004 IPO.
Fans believe that Twitter, which has 230 mln users, has established itself as an indispensable Internet utility alongside Google and Facebook, and that it has only scratched the surface of its potential as a global advertising medium.
The IPO was shadowed for months by Facebook's troubled 2012 debut, in which the shares quickly fell below their offering price amid trading glitches and subjected the company and its lead banker, Morgan Stanley, to accusations that they had been greedy in pricing the deal.
Twitter's opening appeared to go off without a hitch, prompting Anthony Noto, the Goldman Sachs banker who led the IPO, to write a simple Tweet: "Phew!"
Still, Twitter may find itself subject to the opposite criticism, that it had priced the shares too low and left more than a billion dollars on the table.
The 70 mln IPO shares represent about 13% of the company's common shares. Twitter was the most actively traded stock on Thursday, with around 117 mln shares changing hands.
IN SAN FRANCISCO
At Twitter's headquarters in San Francisco, offices opened early and hundreds of employees flocked to the 9th floor cafeteria to watch the festivities on TV while eating "cronuts," a croissant-donut hybrid, made by Twitter's resident chef, Lance Holton.
The IPO is the latest milestone for a service that was born out of a nearly-defunct startup in 2006 and was derided by many in its early years as a silly fad dominated by people talking about what they had for breakfast.
But Twitter quickly began to penetrate popular culture in unexpected ways, with its open design and broadcasting format attracting celebrities, athletes, politicians and anybody who wanted to share short, punchy thoughts with a digital audience.
Its business potential developed more slowly, and the company appeared to be floundering as recently as three years ago, when it was riven by management turmoil and frequently crippled by service outages.
Under Dick Costolo, who took over as CEO in October 2010, Twitter has rapidly ramped up its money-making engine by selling "promoted tweets," messages from marketers that are distributed to a wide-ranging but targeted group of users. In the third quarter, Twitter had $168 mln in revenue, it said, more than double from a year prior.
The NYSE, which snatched the listing away from its tech-focused rival, Nasdaq, marked Twitter's debut with an enormous banner with the company's blue bird logo along its Broad Street facade.
British actor Patrick Stewart, of Star Trek fame, rang the opening bell at the Big Board together with nine-year-old Vivienne Harr, who started a charity to end childhood slavery using the microblogging site.
Costolo and Twitter's three co-founders – Evan Williams, Biz Stone and Jack Dorsey – appeared on the packed exchange floor to witness the beginning of trade.
At current valuations, the stakes owned by Williams and Dorsey would be worth around $2.7 bln and $1.1 bln, respectively. Costolo, who invested $25,000 in the fledgling company in 2007, holds a 1.4% stake worth about $360 mln.
SELL RATING
Investor enthusiasm for the microblogging company defied traditional valuation analyses. The shares traded at about 22 times forecast 2014 sales, nearly double the multiple at social media rivals Facebook and LinkedIn, even though Twitter is far from turning a profit and posted a loss of almost $70 mln for its most recent quarter.
The hefty valuations were cause for celebration for Twitter insiders and venture capital backers, such as Union Square Ventures, Spark Capital and Benchmark Capital. But some analysts warned that a correction may be in store.
Fund managers who got small allocations at the IPO were hopeful the stock would trade down after Thursday's pop. Jerry Jordan, manager of the $48.6 mln Jordan Opportunity Fund, who got a small allocation, said he would buy more of Twitter if it trades down around $30-$35.
INTERNATIONAL GROWTH
As Twitter's stock soared after the opening, the company's market value, including restricted share units and other securities that could be exercised in the coming months, was over $28 bln.
The company said in its investor prospectus that more than three-quarters of its users are outside the United States. Despite its early reputation as a hangout for Silicon Valley early adopters and tech geeks, some of its most active markets now include Japan, Indonesia, Brazil and Saudi Arabia.
The fast-moving, mobile service was credited with fueling popular protests that upended the Arab world in 2011. It served as a lifeline to the outside world for its users during natural disasters like Hurricane Sandy, and also instantly relayed news such as early rumblings of the 2011 U.S. raid on Osama bin Laden's compound in Pakistan.
The three most-followed accounts belong to a trio of pop stars: Katy Perry, Justin Bieber and Lady Gaga. U.S. President Barack Obama comes in fourth.
The 140-character messages have spawned an Internet culture of its own. The "hashtag," a pound symbol devised by early Twitter users to denote the topic of a conversation, has became ubiquitous, with the word even becoming an ironic expression parodied by the likes of "Saturday Night Live."
Twitter's successful debut is likely to stoke interest in other up-and-coming consumer Internet companies such as ride service Uber, scrapbooking site Pinterest, accommodation service Airbnb and the payment start-up Square, all of which boast private-market valuations well north of a billion dollars and could go public in the coming years.
Still, two early social media success stories, Groupon Inc and Zynga Inc, have suffered major reversals since going public. Groupon, despite big gains in its shares this year, still trades at less than half its 2011 IPO price. Zynga is worth about a third of its 2012 IPO price.
And first-generation social media firms such as MySpace have all but vanished as fickle users moved on to the next big thing.
