Twitter flew high in its first day of public trading, raising billions for the company's founders and highlighting a growing exuberance -- rational or otherwise -- for stocks, and social-networking stocks in particular.
Shares of Twitter surged on their first day of trading on the New York Stock Exchange on Thursday, under the ticker symbol "TWTR." The company and its underwriters, led by Goldman Sachs, on Wednesday evening had set a starting price for the stock of $26. That price didn't last a millisecond: The stock started trading at $45.10, jumped as high as $50 and ended its first trading day at $44.90 -- a 73 percent gain.
At Twitter's closing price on Thursday, the seven-year-old company had a total market value of more than $25 billion, making it worth more than companies such as Kellogg, Netflix and Whole Foods and twice the value of iconic aluminum giant Alcoa.
Twitter's first-day jump, and the hype surrounding its IPO -- which included the actor Patrick Stewart, a star Twitter user, ringing the NYSE opening bell -- harkened back to the go-go days of the tech-stock bubble in the late 1990s. The gain was so great that even CNBC yeller Jim Cramer, an early Twitter cheerleader, on air called the valuation "worrisome." "It can't be justified," he wrote. In a tweet, of course.
Fittingly, Twitter's hyped IPO comes at a time when some market watchers are starting to warn of a new bubble forming in stocks. The Dow Jones Industrial Average and Standard & Poor's 500-stock index are at record highs, and the tech-heavy Nasdaq is at its highest levels since early 2000, just after the tech bubble burst.
A strong first-day showing means the company might have underpriced its IPO, potentially missing out on billions of dollars it could have invested in its future growth. But corporate insiders -- including co-founders like Evan Williams, whose stake was worth $1.5 billion before trading began, and Jack Dorsey, with a stake worth about $600 million -- will get even richer.
And Twitter will likely be glad to avoid the embarrassment suffered by its larger rival, Facebook, which experienced technical glitches and dismal price performance after its IPO in May 2012. That was one reason Twitter chose the NYSE instead of its tech-heavy rival, the Nasdaq, which struggled to handle the Facebook IPO. In contrast, aside from an hour-plus delay while specialists sorted out buy and sell orders before the stock started trading, Twitter's IPO was glitch-free.
In the longer term, though, investors must grapple with the fact that the hyperactive social network, which lets users share news, jokes, insults, cat videos and more in 140-character chunks, has not yet figured out how to make any money. It lost nearly $65 million in the quarter that ended in September, nearly three times the loss it suffered in the same quarter in 2012. Even before it started trading, Twitter was more expensive relative to its sales than Facebook, Bloomberg reported recently.
The appetite for Twitter's shares is a sign investors have faith in the company's ability to find a way to turn its 200 million or so monthly active users, including President Obama and Pope Francis, into a profit.
It is also a sign of a broader thirst for social-networking companies that has driven the market value of other young companies such as Pinterest and Snapchat into the billions.