<p>“I wonder if a company has ever sued their underwriter because the IPO price was so much lower than the first public trade.”</p>
<p>I am unaware of this ever occuring.
I think most companies are happy about the stock rising big. Most of twtr has not been sold. If you are long a stock, don’t you want it to go higher?</p>
<p>Havent you ever sold a percentage of a stock you have owned? Maybe at first an investor wants the stock he sold to go down after he sells some. Makes the investor think he made an intelligent decision. But after awhile, the investor still wants the stock he still owns to rocket up.</p>
<p>I very rarely trade stocks any more - just doing boring broad indexes, but I have superficially followed facebook, twitter, and linkedin just out of curiosity, and admit I just don’t understand IPO pricing. Why were the FB/TWTR IPOs so different - did they use different valuation methods or were IPO prices set based on specific strategies that were very different? </p>
<p>What I mean is one of the first IPO fevers I got involved in was for Cathay Pacific some 30 years ago and all of us committed for dozens of times more than what we were prepared to buy, and most got nothing or a pittance because it was so heavily oversubscribed. Word on the street (for what it’s worth) was that they definitely knew they could have gotten more money, but saw more value in being spectacularly oversubscribed. </p>
<p>For an IPO like Twitter’s is the strategy a deliberate attempt to make it oversubscribed by pricing it low and “losing” money on a small percentage of the shares so that what the owners hold is worth more? I would have thought the IPO performance really doesn’t reflect on what the owners get months/later. Or is it just purely an accident that FB and TWTR ended the day the way they did, and a year post IPO their relative performance could easily be reversed?</p>
<p>Twitter co-founders own around 17%
CEO owns 1.6%
Private equity firm Rizvi Traverse 15%
Underwriters JPMorgan 10%
Benchmark Capital, Kleiner Perkins other VCs around 10%</p>
<p>I can see why “outright gambling” is in the title of this thread. Not being one of the market “sharpies” who frequents this thread, perhaps I’m wrong, but I would never buy an ipo with so much exuberance behind it. I’d wait. This along with the markets near an all time high, with the common belief that this is a seasonally strong period for a lot of stocks (may be wrong this time), no 10% correction in 2 years and with momentum stocks starting to lag makes me a sceptic.</p>
<p>Now my kids are going to be really priced out of the real estate market.</p>
<p>Twiiter sold an extra 10 milliom shares at 26 so I guess the executives are happy with the price. </p>
<p>I am not an investment banker and some of the questions are investment banker questions. </p>
<p>I would just say that twtr tried to learn from the fb deal. I dont think executives want to see their stock price drop 50 percent from the ipo price. Makes for unhappy shareholders. I think twtr rose more than expected. I am pretty sure the twtr people are very happy. </p>
<p>I had a friend who was an investment banker and he worked on a $4 billion merger deal. One of the companies had very little revenues. I asked how did you come up with a $4 billion price?</p>
<p>The investment banker said, “We made up the number”. </p>
<p>The last company I was with went up for sale and we did not know if the company was going to sell for less than book value or more than twice book. A company has to offer itself before a price is discovered.</p>
<p>dstark, the yahoo.com article about all these internet companies without any profits looking to go public at sky-high valuations reminds me of a similar time prior to the high-tech crash in 2000.</p>
<ol>
<li><p>A lot of those 2000 tech companies didn’t have any profits.</p></li>
<li><p>Unfortunately all of these companies have low entry barriers and are a fad that can quickly be replaced.</p></li>
</ol>
<p>My thought is that the twitter stock price will drop into the 30’s. I maybe wrong just a guess. It seems many retail investors buy the inflated IPO and then the price drops. Time will tell.</p>
<p>I’m sure there are plenty of us feeling the same way about some social media websites now. ;)</p>
<p>Just did a quick check, and it turns out after Rupert Murdoch’s company bought Myspace for $580 million back in 2005 they wound upreselling it in 2011 for $35 million. If only there had been a similar story for friendster, xanga, livejournal, etc etc.</p>
<p>Net Losses since 2010 but this year ending 9/30th, the company will finally have .15M profit. Its competitors are AMZN, WMT. According to the article, The key worry for the company is its order-to-ship time, which in the third quarter of 2013, takes about 11.4 days. the company normally does not maintain an inventory of the products it offers. It typically purchases the inventory only after it receives the orders.</p>