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Twitter Goes Public, Gains 76%

Deepak Shenoy2 min read
Quick Facts
What is "Twitter Goes Public, Gains 76%" about?
What category is this article in?
Commentary
Who wrote this article?
Deepak Shenoy, Capitalmind's research team.
When was this article published?
Published 8 November 2013.
How long does this article take to read?
2 min read
What topics does this article cover?
IPO

[blurb-capmind-prem]

Twitter has listed on the NYSE (TWTR) at a 76% premium to the IPO price of $26. The closing price was $44.90, giving the internet social media company a market cap of $24.46 Billion. To give you an idea of what that means: This is a valuation of Rs. 2.75 trillion, which is higher than all but two companies in India (Reliance and TCS).

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The Twitter IPO has however scared off people from other social media companies.

  • Facebook was down 3.2% (to $47.56)

  • LinkedIn was down 4.2% (to $211)

  • Groupon was down 5% (to $9.5)

The US market itself was down overall yesterday.

Some might think this was bad for twitter as they could have gotten a higher valuation in the IPO itself, and they sold their shares cheap. I think that’s a wrong way to think - the company gains a lot by a blockbuster valuation and the value to the company and other shareholders is much greater if the stock price is seen as rising. Look at LinkedIn, which priced at $45, and is now at $211. And then at Facebook which priced at $38, then fell to the $20s and is still in the $40s.

In India, I believe the big sites have to go list. Indiatimes, Flipkart, Snapdeal, Zomato, Cleartrip, One97/PayTM and other businesses hesitate to list because of tough laws that require 25% dilution (at least) if your company is valued at less than 4,000 cr.. (Just dial was forced to dilute 25% because of this!) These are stupid regulations in one sense - who is SEBI to decide what level a company should list at? But the 25% rule is not a bad one - the more shareholders you have, the better it is, and further rounds of dilution will be a much higher premium if you are a first mover. (Just dial IPO’ed at less than Rs. 500, now it’s 1100 in less than six months!)

MakeMyTrip listed in the US and valued richly.

I look forward to more Indian online businesses listing, so we get better companies to buy. I think leaving a lot of money on the table for the IPO is a good thing - and in the longer run will benefit the company very much.

Tagged:IPO