November 7, 2013

Dazzling Twitter debut sends stock soaring

By the closing bell, the social network that reinvented global communication in 140-character bursts was valued at $31 billion.

By Barbara Ortutay
The Associated Press

(Continued from page 1)

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Twitter CEO Dick Costolo, left, and Mike Gupta, center, chief financial officer of Twitter, talk with specialist Glenn Carell during Twitter’s initial public offering, on the floor of the New York Stock Exchange on Thursday.

The Associated Press

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Specialist Glenn Carell, who handled the Twitter IPO, works at his post on the floor of the New York Stock Exchange on Thursday.

The Associated Press

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.

The Securities and Exchange Commission later fined Nasdaq $10 million, the largest fine ever levied against an exchange.

Those problems likely led Twitter to the NYSE.

At its IPO price, Twitter was valued at roughly 28 times its projected 2013 revenue — $650 million based on its current growth rate. In comparison, Facebook trades at about 16 times its projected 2013 revenue, according to analyst forecasts from FactSet.

Google Inc. meanwhile, is trading at about 7 times its net revenue, the figure Wall Street follows that excludes ad commissions.

Research firm Outsell Inc. puts Twitter’s fundamental value at about half of the IPO price, said analyst Ken Doctor. That figure is based on factors such as revenue and revenue growth.

“That’s not unusual,” Doctor said. “Especially for tech companies. You are betting on a big future.”

As a newly public company, one of Twitter’s biggest challenges will be to generate more revenue outside the U.S.

More than three-quarters of Twitter’s 232 million users are outside the U.S. But only 26 percent of Twitter’s revenue comes from abroad. The company has said that it plans to hire more sales representatives in countries such as Australia, Brazil and Ireland.

Twitter shares entered a declining market. Wall Street had its worst day since August as traders worried that the Federal Reserve could cut back on its economic stimulus.

Investors grew concerned about a surprisingly strong report on U.S. economic growth in the third quarter, which led many to believe the Fed could start pulling back as soon as next month, earlier than many anticipated.

After 33 record-high closes this year, an increasing number of investors believe the stock market has become frothy and is ready for a pullback.

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