Twitter’s (TWTR) eagerly anticipated IPO was a resounding success for the investment banks and IPO participants. For retail investors, it was a non-story.
The IPO price of $26 was much higher than earlier estimates, but was a real bargain compared to the $45.50 price that the stock saw on the open market when it began trading Thursday morning. Investors quickly gobbled up the shares for an initial run to a $50 resistance, only to slide back to its first open market price, where it remained much of the afternoon, only to close lower.
The stock opened with a pop on Friday only to decline steeply as the S&P 500 rose modestly on good jobs numbers in early morning trading. With some recovery here and there in intraday trading, the stock is still seeing greater volatility in its second day of trading than its first.
There were a lot of vested interests in getting the TWTR IPO right. Twitter’s own management has clearly learned from Facebook’s mistakes, doing a meticulous roadshow with prospective investors before the IPO and openly answering questions and alleviating worries about the company. Of which there are many. No profitability, a relatively small userbase, and concerns about user engagement have been major focuses for investors. Later in the day, some analysts initiated coverage with sell ratings or negative concerns that mean real risk for Twitter investors.
Additionally, Twitter’s investment banker, Goldman Sachs (GS), was keen on getting this one right. The Facebook (FB) IPO was one of the greatest Wall Street disasters of the past decade, and Goldman wanted to ensure that the stock saw minimum volatility in its first day of trading. It’s no surprise that the stock traded in a very narrow range, and closed only modestly lower than $45.
Finally, the stock exchange itself wanted to avoid the many high profile errors of the recent past. With glitches on Nasdaq with the Facebook IPO, the NYSE knew that it had to see an orderly IPO with no errors if it wanted to retain the good reputation that gives it an edge over its recently flailing upstart competitor. And there were no problems at all.
With a smooth and very green IPO day, TWTR has made its bankers, its earliest investors, and its management happy. But some retail investors got caught holding the back—namely, those who bought TWTR stock on its IPO day. While Goldman and NYSE probably aren’t spending much time worrying about this, they should. If the red of Friday morning persists into the coming weeks, we could see the initial success of the IPO transform into uncomfortable questions of why the market allowed certain investors a $20 per share profit in one minute, and a 3% or more loss in one day for other investors.