Twitter is soon turning public with the debate between a higher or lower IPO. With a provisional range value between $17-$20 for it’s stock, which would value the firm up to $11.1 billion. Speculation is lately arising about the overvalued price per stock, causing Twitter’s IPO to decline. Yet on the other hand, some investors like Doug Kass who claims that the share value will rise in the first month of trading, and consumers are willing to pay $32.50 per share. In my opinion regarding a firm’s IPO, the share value shouldn’t be overvalued, as there are numerous consequences to that. First and foremost, a continuous fall in the stock price would not only lead to bad reputation but causes firm’s to focus in the short term growth instead of the long term growth. Managerial decisions may turn out to be riskier given investor’s pressure on immediate profit results.
On the other hand, a firm must consider not having the IPO valued too low, as it would reduce the possibilities of maximizing profits. In the case of ‘Twitter’, less money towards market research and development would be available.
reference: