Twitter shares soar in US market debut

By Agencies in New York | China Daily | Updated: 2013-11-09 08:05

Twitter made a spectacular Wall Street debut on Thursday, but analysts warned of challenges ahead for the popular messaging service vying to become the next fixture for global Internet users.

Shares shot up by more than 90 percent in early trading to as high as just more than $50. In the end, the stock closed with a one-day gain of 73 percent at $44.90, from the initial public offering price of $26.

But analysts cautioned that the success of the IPO was just a first step for Twitter, which must now justify its hefty valuation.

"Kudos to Twitter for orchestrating a highly successful IPO," said Lou Kerner of the Social Internet Fund.

"However, as Facebook showed, an IPO success, or disaster in Facebook's case, is really just noise in the long term. Twitter's success as a stock is going to be based on how the company performs."

Kerner said Twitter "needs to perform extraordinarily well, in terms of user growth, user engagement and user monetization to justify its price."

Appropriately, Twitter's IPO was among the top trending topics on the social network for much of the day.

The key Twitter founders attended the opening on the New York Stock Exchange, along with Star Trek actor Patrick Stewart and a 9-year-old girl who operates a lemonade stand.

"We have a lot of work ahead of us," Twitter Chief Executive Dick Costolo told US TV network CNBC from the floor of the stock exchange. "All the capital raised by this is going into the company."

Asked about Twitter's growth potential, Costolo said "it's all about making it very simple and easy for new users to come to the platform ... we all have examples of why this service can be useful to everyone on the planet."

Cantor Fitzgerald analyst Youssef Squali was upbeat about the company, saying in a note to clients that "Twitter is based on a one-to-all, all-the-time broadcast distribution model, and as such, fulfills an unmet need".

"This model is highly complementary to traditional media outlets - especially TV - and fulfills the need for up-to-the-minute, trending information in real time," it said.

But Brian Wieser at Pivotal Research issued a "sell" recommendation after the opening, saying Twitter "is simply too expensive" after the hefty opening gains with "nearly the same valuation as CBS ... or even Yahoo".

Larry Chiagouris, a professor of marketing at Pace University, said the "investor mania" around Twitter is not an indication of success.

"The fundamental question is how much people have to say on Twitter," he said.

"We know there are some people who are social and want to talk all the time, but you can't make a business model on those people."

Twitter offered 70 million shares trading under the symbol TWTR, generating $1.82 billion, and gave underwriters a 30-day option to purchase an additional 10.5 million shares.

The IPO assigned a market value of around $14.4 billion to the company whose messaging service has become a hugely popular tool for celebrities, journalists, political leaders and others. But by the end of the day, that value had topped $24 billion.

AFP-AP