A few weeks ago in class, we talked about Financial Markets, specifically about technology companies and their I.P.O’s. The company we discussed the most was Facebook, and the mistake they made by overpricing their I.P.O, and many people wondered if Twitter would do the same. It turns out that Twitter learned from Facebook’s mistake, as their I.P.O was not overpriced. Twitter’s I.P.O was set at $26 a share, and on November 7th 2013, when Twitter hit the stock exchange, shares were being traded at $45.10. However, I read a very interesting blog post by Vauhini Vara on The New Yorker, who provides a completely different perspective on the situation. Vara says, “Twitter made a different error by underpricing its I.P.O. Twitter’s mistake, actually, might have been worse”. This blog post was very interesting and useful to me because originally, after constantly reading and hearing about the mistake Facebook made, I only looked at I.P.O pricing from one point of view, and that was that overpricing an I.P.O is a mistake. However, after reading what Vara had to say, I have come to the realization that underpricing an I.P.O is a mistake as well. This is because Twitter only got $26 a share, which generated them $1.82 billion. However, the fact that at opening, shares were being traded at $45.10 and then closed at $44.90 on its first day of trading shows that there was much more money out there for the taking.
Vara, V. (2013, November 09). Who gained from twitter’s underpriced i.p.o.? . Retrieved from http://www.newyorker.com/online/blogs/currency/2013/11/who-gained-from-twitters-underpriced-ipo.html
Popper, B. (2013, November 07). Twitter’s stock closes at $44.90 a share, up 73 percent on its first day. Retrieved from http://www.theverge.com/2013/11/7/5076484/twitter-ipo-twtr-public-offering-stock
Wall Street Graphics. (Designer). (2013, November 04). Twitter bumps its IPO price to $23-$25 per share [Web Graphic]. Retrieved from http://news.cnet.com/8301-1023_3-57610649-93/twitter-bumps-its-ipo-price-to-$23-$25-per-share/