Fears rise of another dotcom bubble with social network yet to move into the black
Sceptics who thought Twitter's first day of trading would be a repeat of Facebook's disastrous market debut were proved wrong on Thursday, as the social network's value soared to more than $27bn.
Shares in Twitter opened at $45.10, when it began trading on the New York Stock Exchange and surged as high as $50.08, handing the loss-making company a valuation higher than corporations such as BSkyB, Sainsbury's and BAE Systems.
Twitter had given itself a $14.2bn price tag on Wednesday evening, when the eight-year-old business priced its initial public offering at $26 a share.
It handed the traditional task of ringing the NYSE's opening bell over to the social network's users, including Sir Patrick Stewart, the actor, and Vivienne Harr, a nine-year-old anti-slavery campaigner, who did the honours wearing a tiara and a blue tutu.
However, the San Francisco business did not start trading for more than an hour after the exchange opened, as NYSE took its time calculating the exact opening price for the shares.
The delay briefly raised fears that there had been a technical glitch, echoing the blackout which forced the rival Nasdaq exchange to delay Facebook's market debut.
Twitter's initial surge also had echoes of Facebook, which placed at $38-a-share when it went public in May 2012, and traded as high as $44.50 before falling back to just above its opening price. In the following months, it fell far below $38 to as low as $17.55, in what was seen as one of the most disastrous technology IPOs for a decade. It has only recently recovered its lost ground.
However, the similarities ended there. Twitter's shares appeared to be maintaining their momentum. In afternoon trading in New York, they were holding relatively steady at around $45.75 - an increase of more than 75pc on their IPO price.
The performance will boost the wider technology sector. Twitter's IPO is the biggest test of investor appetite for technology stocks since Facebook's stuttering start and will have a major impact on the valuations other dotcom companies can achieve.
However, Twitter's strong start has also stoked fears of a new dotcom bubble. Many analysts have expressed concern that Twitter does not make a profit and that its business plan is still unclear.
The company, which makes money from advertising, doubled revenues to $168.6m in the quarter to the end of September, helped by a surge in mobile usage.
However, it saw losses widen year on year from $21.6m to $64.6m.
The business has not disclosed when it expects to move into the black. Analysts estimate that it will not do so until at least 2015. "The Twitter IPO shows the sublime and the ridiculous nature of our capital markets," said Peter Garnry, head of equity strategy at Saxo Bank.
"It shows how the capitalist system allocates capital to growth companies.?.?. but these tech IPOs have become like a video game.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}