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Dazzling Twitter debut sends stock soaring 73 pct

Friday - 11/8/2013, 12:10am  ET

CORRECTS NAMES: Bureau Chief of Public Information for the Boston Police Department Cheryl Fiandaca, left, Vivienne Harr, a girl who sells lemonade in the name of ending slavery across the globe, NYSE Executive Vice President Scott Cutler, and actor Sir Patrick Stewart, right, applaud the New York Stock Exchange opening bell is rung for the Twitter IPO, Thursday, Nov. 7, 2013. If Twitter's bankers and executives were hoping for a surge on the day of the stock's public debut, they got it. The stock opened at $45.10 a share on its first day of trading, 73 percent above its initial offering price. (AP Photo/Ben Hider, NYSE)

BARBARA ORTUTAY
AP Technology Writer

NEW YORK (AP) -- Shares of Twitter went on sale to the public for the first time Thursday, instantly leaping more than 70 percent above their offering price in a dazzling debut that exceeded even Wall Street's lofty hopes.

By the closing bell, the social network that reinvented global communication in 140-character bursts was valued at $31 billion -- nearly as much as Yahoo Inc., an Internet icon from another era, and just below Kraft Foods, the grocery conglomerate founded more than a century ago.

The stock's sizzling performance seemed to affirm the bright prospects for Internet companies, especially those focused on mobile users. And it could invite more entrepreneurs to consider IPOs, which lost their luster after Facebook's first appearance on the Nasdaq was marred by glitches.

In Silicon Valley, the IPO produced another crop of millionaires and billionaires, some of whom are sure to fund a new generation of startups.

Twitter, which has never turned a profit in the seven years since it was founded, worked hard to temper expectations ahead of the IPO, but all that was swiftly forgotten when the market opened.

Still, most analysts don't expect the company to be profitable until 2015. Investors will be watching closely to see whether Twitter was worth the premium price.

Thursday's stock surge was "really not as important as you might think," said Kevin Landis, a portfolio manager with Firsthand Funds, which owns shares in Twitter. "What really matters is where the stock is going to be in six months, 12 months."

The most anticipated initial public offering of the year was carefully orchestrated to avoid the dysfunction that surrounded Facebook's IPO.

Trading on the New York Stock Exchange under the symbol "TWTR," shares opened at $45.10, 73 percent above their initial offering price.

In the first few hours, the stock jumped as high as $50.09. Most of those gains held throughout the day, with Twitter closing at $44.90, despite a broader market decline.

The narrow price range indicated that people felt it was "pretty fairly priced," said JJ Kinahan, chief strategist at TD Ameritrade.

The price spike "clearly shows that demand exceeds the supply of shares," said Wedbush analyst Michael Pachter.

Earlier in the day, Twitter gave a few users rather than executives the opportunity to ring the NYSE's opening bell. The users included actor Patrick Stewart, who played Captain Jean-Luc Picard in "Star Trek: The Next Generation"; Vivienne Harr, a 9-year-old girl who ran a lemonade stand for a year to raise money to end child slavery; and Cheryl Fiandaca of the Boston Police Department.

Twitter raised $1.8 billion Wednesday night when it sold 70 million shares to select investors for $26 each. But the huge first-day pop left some analysts wondering whether the company could have raised more. Had Twitter priced the stock at $30, for instance, the company would have taken away $2.1 billion. At $35, it would have reaped nearly $2.5 billion. That's a lot for a company that's never made a profit and had revenue of just $317 million last year.

If the price stays this high, or goes even higher, shareholders will no doubt be happy. But the money that they might make from any stock sale doesn't go to the company.

Named after the sound of a chirping bird, Twitter's origins date back to 2005, when creators Noah Glass and Evan Williams were trying to get people to sign up for Odeo, a podcasting service they created. Odeo didn't make it.

By early 2006, Glass and fellow Odeo programmer Jack Dorsey began work on a new project: teaming with co-worker Christopher "Biz" Stone on a way to corral text messages typically sent over a phone.

It was Glass who came up with the original name Twttr. The two vowels were added later. The first tweets were sent on March 21, 2006.

By 2007, Twitter was incorporated with Dorsey as the original CEO and Williams as chairman. Dorsey and Williams would eventually swap roles. Both remain major shareholders, though neither runs the company. Glass, meanwhile, was effectively erased from Twitter's history, writes New York Times reporter Nick Bilton in "Hatching Twitter: A true story of money, power, friendship, and betrayal."

Since those early days, the site has attracted world leaders, religious figures and celebrities, along with CEOs, businesses and countless marketers and self-promoters.

The company avoided the trouble that plagued Facebook's high-profile debut, which suffered technical glitches that had lasting consequences. On that first day, Facebook closed just 23 cents above its $38 IPO price and later fell much lower. The stock needed more than a year to climb back above $38.

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