
TWTR - sc90
http://www.google.com/finance?q=NYSE%3ATWTR&ei=7a97UujgDO-UwQP89AE
======
corford
Can someone with more clue please tell me that the following cynical thought I
keep having is wrong and laughably misinformed (and then explain why)?

Twitter's investors (who have plowed hundreds of millions in to a loss making
company) decide to sell some of their stock at $26/share (after consulting
with banks to arrive at this price). This will make right the losses they've
experienced so far and pass the problem down the line. The banks buy at $26
and then immidiately flip for north of $40. This lines their pockets and
passes the problem down the line once more to joe public.

End result: investors in loss making company cover their investment and make
some profit, banks make some juicy profit for facilitating the game, joe
public swallows the hype and makes the whole dance possible by eventually
footing the bill.

Edit 1: thanks everyone for the thoughtful replies. I guess I can only
continue to feel cynical if I believe that the original investors did all of
this knowing full well that twitter never has a chance of living up to its
valuation i.e. they just wanted to cover their losses, make a nice profit on
top and punt the problem down river. The alternative is that the investors do
honestly believe in the future profitability of the company and have decided
now is the time to take some well earned profit as a reward for taking the
financial risks in getting the company to where it is today.

It's going to take me some time to make my mind up as to which of those two
scenarios I believe.

Edit 2: still difficult to understand why the banks have managed to come away
with doubling their money though.

Edit 3 (final one!): See
[https://news.ycombinator.com/item?id=6691157](https://news.ycombinator.com/item?id=6691157)
for a nice reply that seems (to my clearly very untrained eye) to make the
investors motives a little less cynical.

~~~
ChuckMcM
I think you fundamentally misunderstand the process but that is ok, its not
all that straight forward.

The transaction here is between risk takers (venture capitalists and
investment banks) and risk pricers (people who buy stock). Nobody is getting
"ripped off" as long as everyone is following the rules set down by the SEC.

Investors put money at risk. You know that because you've been here on HN a
couple of years and no doubt read the <foo> is shutting down. stories. For
each of those there is usually one or more investors who have put in thousands
if not millions of dollars who get anywhere from $0 to some fraction of their
investment back. Sometimes, their investment 'bet' pays off and they get back
multiple times their investment. The trick is you blend all of those $0 and
multi-X returns and you get their "effective" return.

"Joe Public" and by that I assume you mean an unsophisticated retail investor
(they aren't investing anyone's money but their own). Can achieve a similar
result by buying "shares" in a fund managed by a banker. When folks ask me
where I would put some extra savings I tell them I've been very pleased with
the Vanguard funds. You make more than then .8% return that a Bank savings
account pays, and your risk is relatively moderate (but if it is not zero like
it is with the savings account). But this unsophisticated person should
_never_ be investing in an IPO stock.

The professional managers who invest in an IPO stock may have hundreds of
millions of dollars under management. They spread some of those over a number
of IPOs as a way to provide 'long kicks' (which is that the stock is held for
a long time and the success provides a large return many years later). Clearly
they aren't putting their kids college fund in there. And most of the _other_
dollars in their fund are on much 'safer' sorts of things, like Coca Cola or
Alcoa.

So this is the 'cycle of life' for many new tech companies, and if these
investors in Twitter do well their Venture Funds will have a reasonable rate
of return, and more rich people will give them some of their 'excess' funds to
invest in other tech companies, and you and I can go get some of that by
pitching them a great team and a great idea.

So for the 11 times smart people came to them and they gave them millions and
got nothing back, this 12th time they got a lot back. Nobody gets hurt as long
as the people who don't know what they are doing stay out of the game. That
didn't happen in the late 90's lets hope it doesn't happen again.

~~~
YZF
The underwriters who will make hundreds of millions here... (EDIT, well, many
millions at least) What sort of risk are they taking that justifies their
rewards and how does it help the economy? And the individual bankers who will
take millions of dollars in bonuses home because they get paid for the 12th
time and don't get penalized for the 11 others, what sort of innovation did
they contribute to the world?

I think we all understand the deal with investors who get in early and invest
money in something that has a chance to fail will make money if it succeeds.

The IPO is a suckers game. It says me as an insider value the company less
then you as an information limited outsider. If Twitter is worth $50 bucks a
share why were its investors willing to part with their stock for $26 a share
only yesterday? Sometimes you can profit even in the presence of this
information disparity because the company will outperform its expectations,
but now you're 1 out of 144...

<rant over> :-)

EDIT: I think a solution to that is perhaps a combination forcing companies to
go public sooner (limit IPO valuations or spread the share sale over longer
periods), combine with more limits on insiders, more and earlier disclosure
and perhaps combine that with a more KickStarter like model - eliminate the
middle man.

~~~
mathattack
One comment... Google and Facebook each tried to stick it to the bankers in
their own ways. In the end both struggled as a result. Google tried to cut out
bankers and make them play by special "Just for the Google IPO" rules and
rates. By creating a custom-IPO process, they saved on banker fees but wound
up leaving an awful lot of money on the table.

Facebook went the other way. They tried to grab every last penny on the table.
Their stock underperformed post-IPO which isn't good either.

You can put Twitter in an overreaction the other way - they didn't want to
leave money on the table (raising the shares to 26) but didn't want to be too
greedy either.

The bankers get paid to line up supply and demand. They may be helped by being
an oligopoly, but right now the market isn't set up to cut them out of the
loop.

~~~
robterrell
Help me understand why Facebook taking every dollar out of the market was a
bad thing for them. I understand why Wall Street wasn't happy about it (since
they expected a pop they could profit from & had to buy stock to fulfill their
obligations... and why should taking a company public be an entirely risk-free
profit opportunity anyway?)

But, why was it bad for Facebook? Sure, their stock was below the IPO value
for almost a year, but employees almost certainly had their options priced
well below the IPO price, right? What other ways can a slightly lowered stock
price hurt a company in the year after an IPO? Genuinely curious about this.

~~~
encoderer
Not "certainly." We had an IPO where I work in 2012. People hired very
recently before the IPO had a strike price near the offering price.

Moreover, there is a mental dynamic when recruiting. A steadily appreciating
stock is a helluva recruiting tool.

------
arjunnarayan
If it stays at $46, that's a gigantic fuck up. They left a billion dollars on
the table, and that's borderline breach of fiduciary duty.

Of course, we have to wait and see what it settles at, and it's a little
premature to heap scorn just yet. But the initial reaction is it looks like
they overreacted to the Facebook IPO debacle (in my book, Facebook did the
best thing possible for the company and extracted as much value as possible
from the public markets --- and the value buyers didn't get screwed, given
that a year later it's trading at ~20% above the IPO price.).

~~~
davidw
Can someone who knows about these things explain why no one else does auctions
like Google did? I mean, these guys are supposed to be about markets, right,
so why the heck is the price decided by some kind of "central committee"?!

~~~
nikcub
Google's auction didn't work, they marginalized wall st. and the banks ended
up rigging the bidding. While it only popped 20% on opening day, the stock was
up 4x in a matter of months.

~~~
davidw
When you say "didn't work", what do you mean? "Rigging the bidding" sounds
like a big deal - where is this covered?

------
jstalin
Income statements:

[https://www.google.com/finance?q=NYSE%3ATWTR&fstype=ii&ei=TL...](https://www.google.com/finance?q=NYSE%3ATWTR&fstype=ii&ei=TL17UqCbK4G20AH2PA)

About $553 million in revenue in the last year, with spending of $668 million.

~~~
tootie
I'm personally shocked they have that much revenue. Is it just selling ads?

~~~
tedunangst
I'm amazed how much they're spending. What are they paying for?

~~~
the_mitsuhiko
2000 employees.

~~~
crisnoble
Who what, make 200k a piece?

~~~
BCM43
With taxes and benefits, it's not that far off. Plus office space for them,
computers for them, a whole host of other perks.

------
dangero
Serious question: Why does the Hacker News crowd seem to be so cynical about
big tech IPOs? Considering for most startups this is the dream, why aren't
there more congratulatory high fives? Is it just a case of jealousy?

This IPO is going really well. The stock is being well received in the
marketplace. I know twitter employees who just got rich are reading this, but
can't comment due to SEC rules, so congrats Twitter peeps!

~~~
aryastark
Advertising platform + Web does not equal "tech company". I've never really
been excited about Twitter's tech, since it's mostly just inverted IRC. You
"join" people, rather than channels. And channels become hashtags. Then they
centralized the entire thing and put a dot-com face on it all. The only way
Twitter makes money is by buying out or eliminating competitors, mostly mobile
apps. Any high fives for getting crushed by Twitter?

So the tech isn't interesting, nor is the business. The interesting part here
is what people are willing to pay for it.

~~~
nly
The whole point of Twitter was you could tweet from an SMS wasn't it? SMS was
supposed to be the primary platform...

------
vizzah
What's funny is that anyone with a bit of a forward thinking could have
doubled their money today by buying TWTR Inc (which is not Twitter) trading
for $0.03 with an identical symbol TWTR, but on another market exchange.

As already happened several weeks before (after it was announced Twitter will
be trading as 'TWTR'), the wrong stock exploded due to traders mistakenly
placing their buy orders.

It should have been perfectly safe to assume similar would happen on the IPO
day. It went from $0.03 yesterday to $0.06 today for a while :)

Just look at this graph over 1 month span:

[https://www.google.com/finance?q=OTCMKTS:THEGQ](https://www.google.com/finance?q=OTCMKTS:THEGQ)

~~~
Kranar
Not really. First it's not sold on an exchange, it's only available over-the-
counter, meaning very few brokerages are going to grant access to it. And even
for those who do you can't just submit your order anytime you feel like it and
get executed against, you have to apply to buy the shares and the brokerage
has to find a market maker willing to facilitate the exchange, it can take
days for a trade OTC to go through.

Third, the volume for that stock is only 1.5 million shares a day, that's only
40,000 dollars worth of stock traded a day. To give perspective that's less
than the average amount of Microsoft stock traded in a single second.

So no... you really couldn't have done this strategy.

------
PhasmaFelis
Well, I followed the link.

This must be what non-programmers feel like when somebody links them to a
GitHub repo.

------
legohead
I don't know how these things typically work.. it started out at 46, now it's
below, ~45, but it says +19.66 (75.62%)? Is that because that's the highest it
was today? I would expect the +/\- to be against the starting amount at any
time...

~~~
kilovoltaire
That's because its pre-opening (IPO) price was $26.

So for everyone who got shares before the public trading, their stocks are way
up.

(This is also why people are saying that the IPO price was set way too low;
insiders make tons of money but Twitter itself raises much less money.)

~~~
grecy
Is there any way for the lay man to get in on an IPO like this, or is it
purely for insiders? (I'm thinking about the next one...)

~~~
gkuan
Actually, if you have an account at various retail brokers such as Schwab and
Ameritrade, they have a trade IPO capability. For run-of-the-mill IPOs, it
isn't a big deal and retail investors can get an allocation. For high-profile
ones such as this one, you'll have to be an account holder with lots of money
under their management and generate a lot of revenue for them to get
preference in the allocation process.

------
the_watcher
I'm not an expert in the stock market, and the only stock I own is Facebook
(which I bought a long time ago), but I am confused as to why Facebook is
dropping today while there is so much enthusiasm for Twitter. Buying Twitter
is basically betting on mobile advertising, which Facebook is the clear leader
of. Is it possibly related to people with Facebook stock selling some to get
in on Twitter? Are they entirely unrelated?

~~~
twistedpair
A typical P/E ratio is around 13. Take Apple, smack on 13. If it is too high,
you're spending too much. No official numbers for Twitter's profits, all
guesses, but a suggested $116M profit this year gives a current P/E of 207.
That means it would take 207 years, ignoring inflation (which would make it
much worse) for the company to actually pay its investors/owners back the
price of the company.

This is why people are suggesting going short. It is clearly over valued. The
$26 initial valuation was more reasonable, if you assume the market
information is wrong, and that Twitter will generate a far higher profit in
the future. Your valuation is a bet on the market being wrong and Twitter's
mobile potential being stellar.

~~~
bcoates
The P/E doesn't mean it's overvalued, it means it's priced assuming
substantial growth in earnings. That doesn't make either the forward-looking
market price or the backwards-looking profit numbers wrong.

If that growth is unlikely to happen, then it's overvalued. If Twitter becomes
quadruple-Facebook and is earning $2.5 billion/year in a few years, it's very
undervalued.

------
nine_k
+70%, $24.67B market cap.

Verily, QE3 is strong in this one!

([http://money.cnn.com/2012/09/13/news/economy/federal-
reserve...](http://money.cnn.com/2012/09/13/news/economy/federal-reserve-
qe3/index.html))

~~~
MSM
Currently with more market cap than Marathon Oil which hasn't posted a single
quarter with less $250M in income since 2008.

Totally makes sense....... right?

------
stevewilhelm
Yahoo! Finance is more up to date.

[http://finance.yahoo.com/q?s=twtr&ql=1](http://finance.yahoo.com/q?s=twtr&ql=1)

~~~
goshx
Came here to point that out. I wonder why google's is so far behind.

~~~
samolang
15 minute delay is standard. I'm wondering why yahoo is so ahead.

~~~
stevewilhelm
Way back when, Yahoo worked directly with the exchange to get a real-time
feed.

------
GrinningFool
A much better link than the 'live blog' covering ... erm.. the stock price.

Congrats to the twitter team. Ridiculous overpricing aside (in the
financial/risk management sense), that's a major victory for them. Whether or
not this becomes a financially viable business, there's no question that
they've built an amazing thing and are now getting well-rewarded for it.

------
cft
Can someone advise what's the best way to buy derivatives (etrade,scottstrade,
etc): the fastest way to open an account, the best order execution times? I
want to invest some money to short this.

~~~
MichaelApproved
Please don't take this as snark but I wouldn't recommend shorting _anything_
if you are so inexperienced that you don't have a trading account or don't
know which one to use. Shorting stocks is extremely risky and should only be
done by traders with lots of experience.

If you really want to bank on Twitter going south, you can try buying puts
when they're available. If you're not sure what puts are, leave this whole
idea alone.

~~~
cft
i run a bootstrapped company that i founded in 2006, and i have some extra
money i am totally comfortable of losing entirely. i view this as an
experiment. i am looking for a serious practical advice.

~~~
grmarcil
Consider this carefully: "When you are a long a stock, the most you can lose
is the amount you paid. When you are short, you can lose unlimited money."

If you have "funny money" that you aren't afraid to lose, there are safer and
more responsible ways to experiment with the market than unprotected short
positions.

You may want to read about and understand some options strategies:
[http://www.investopedia.com/terms/b/bearputspread.asp](http://www.investopedia.com/terms/b/bearputspread.asp)
[http://www.investopedia.com/terms/b/bearcallspread.asp](http://www.investopedia.com/terms/b/bearcallspread.asp)

Either one of those strategies gives you the opportunity to profit a certain
amount if the stock actually goes down (the width of the spread times the
quantity), while limiting your exposure to just the premium you pay for the
options. Your exposure is limited because you both buy and sell puts or calls
for equal amounts of the underlying, so you have no net exposure to the price
of the underlying.

A general word of advice about playing the market for short term gain: big
guys make money off of little guys. You may win some, but usually you are
doing damn well as a small time trader if you're batting above 500 at all.

~~~
MichaelGG
Or you can buy puts and the most you're out is the amount you paid for the
option.

If you're looking to play around with some money - basically playing a
gambling game with companies - then options are a fun little game and you can
manage your downside perfectly.

------
SCAQTony
Facebook, Twitter, Linkedin...Sometimes I think the NASDAQ is looking more
like the "Fine Art" auction market rather than an actual stock market.

~~~
dangero
Twitter isn't on NASDAQ. It's on NYSE.

------
downandout
Bottom line: this company is extremely overvalued at the moment. It may or may
not grow into that valuation, but for the next several years, it will be
nothing more than a speculative play. The fact that the company priced itself
at a much lower valuation shows how irrational the current market value is.

~~~
icebraining
If you can't tell if it'll grow into the valuation, you can't really claim
it's overvalued. The fact that you (or the company) don't see reasons to value
it so high doesn't make it true.

Besides, there's no reason to believe that Twitter itself choose the price
based on their own valuation of the company.

------
conductr
Why does it take 1,300* employees to run this company?

* crunchbase

~~~
Rimpinths
I was wondering the same thing. The number of employees is around 2300,
according to Bloomberg. I think you could run Twitter with a
development/engineering staff of 100. What are all of those other people
doing? Sales?

------
Geee
And... this marks the beginning of the end for Twitter as we know it.

~~~
the_watcher
Why do you say that? Facebook has been fine post-IPO.

~~~
mbreese
Twitter is still losing money though... they haven't figured out how to make a
profit. The fear is that what they'll need to do in order to make money will
drive their user-base away.

~~~
the_watcher
That was the fear with Facebook too though. Newsfeed ads, FBX, etc were all
unavailable pre-IPO, and were constantly referenced as the changes that will
break Facebook.

------
headgasket
In the weeks before the twtr IPO: NFLX off by 2B$. TSLA off by 4B FB of by
10B. It looks like investors reallocation to me; the type of investor that
reallocate like this are more of the speculation breed than the buy and hold
breed. I would not be surprised if TWTR is under original IPO price(26) by the
end of next week, as it fails to inflate.

------
zaidf
Twitter still hasn't provided any guidance on profitability. My biggest fear
is that over the next few quarters, Twitter will undo much of the goodwill for
tech stocks generated by Facebook by not being able to match the bar set by
Facebook for profitability, revenue and user growth.

------
bifrost
All in all, looks like a reasonable IPO. Some delays. Basically trading 45-46,
I could see it dropping off some tomorrow.

Mostly I think we'll see shares/profits of SF oriented luxury good companies
go up, and possibly a rise in SFBA housing prices.

------
deathanatos
How does this work again?

"Open" is 45.10, but the graph seems to show it as 46.00, the current price is
46.02, which is "+20.02, 77.00%"? I thought the +X (+Y%) was price-open
((price-open)/open %), but it is way not adding up here.

~~~
steveklabnik
It was offered at $26, but opened at 45, hence +20.

------
koiz
I fear the day that the service decreases in quality. Hell bad dreams of Digg
v4 flash into my mind when I saw how things went today. I wish twitter all the
best but this IPO seems to be pushing their problems down a few years.

------
Xasir
This just a something short term. In couple of month this going to
down..Without any solid revenue plan how they will move.. Now investors will
ask them question for increasing the revenue same like facebook facing the
issue.

------
jedberg
I have to admit I was wrong. I assumed it would flatline like FB.

Congrats to the Twitter team!

~~~
badusername
There is no indication that it has risen from the opening price for the public
markets yet.

------
confluence
TWTR might've been good at a $8 billion cap, but at $25 billion+, investors
are dreaming. It is unsustainable and entirely driven by artificial scarcity
and hype.

Stock markets can't price shit.

------
jscheel
Meaningless unless you were rich AND lucky enough to get into the actual IPO.
All the retail investors that bought as fast as they could at $46 didn't
really reap and benefits.

------
pearjuice
If you buy TWTR stock, what are you investing in exactly?

~~~
fit2rule
A next-generation media company that has millions of people in its database
that can be communicated to, almost instantly about any subject you desire.

~~~
silverbax88
That only matters if you can get a payoff when you communicate with them. As
of now, Twitter advertising is very ineffective at gathering paying customers.
I'm not saying there's no way it can work, and I think they can be profitable,
but it's got a long way to go.

~~~
fit2rule
A lot of money has been made by those savvy enough to know how to use Twitter
to promote a campaign. I think thats worth quite a lot in itself, and if
anyone is geared to understand how these campaigns work, its the people at
Twitter with access to all the statistics ..

------
pyrrhotech
tech stocks with no profits selling at 15-40x sales are a complete crapshoot.
might as well go to the casino

------
ck2
Twitter now has the same stock worth as the international Kraft Foods
corporation.

I am not quite sure how that is possible.

------
philwelch
Disappointed they didn't go with TWIT for the stock symbol.

------
spot
i'm amazed google still uses flash for their stock graphs.

------
GoldfishCRM
Wow, Maybe I should do one of thouse microblogthingis.

------
kolev
I still don't get Twitter!

------
yogo
Hmm, they should pick up twtr.com.

