Twitter's IPO Was Mostly Uneventful, and That Means It Was a Success

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How did Twitter do on its first day as a public company? The stock went up! Then it didn't. They made tons of money, but maybe lost a lot, too? Traders made out okay, unless they didn't. In other words, it's pretty much an average day on the stock market.

Twitter opened on the New York Stock Exchange at $45.10 per share this morning, but then closed the day down slightly at $44.90. But the IPO price that was set last night was $26, so for the underwriting banks and institutional investors who got to participate at the start, that's a healthy 72 percent increase. Anyone who bought it on the open market at $45 basically broke even, unless they sold at the mid-day peak when the stock was briefly above $50. If you bought it there, hoping for a bigger bounce, you're out of luck until tomorrow. Considering that all the stock indexes (Dow Jones, NASDAQ, S&P 500) were down on Thursday, a break-even afternoon for one particular stock isn't too shabby.

As for the company, they raised just shy of $2 billion in new capital, and its top executives are now billionaires. But could they have raised even more? As with a lot of big IPOs, there's always the question of whether the underwriters who set the price got it right. If the stock is selling for 70 percent more than the IPO price, that suggests the price was not accurately pegged to demand. That's not an insignificant error either, since it may have cost Twitter as much as a billion dollars on the sale. 

Then again, all companies want to see their stock price jump at least a little bit on the first day and the difference between offering price and the first sale price is often seen as simply the cost of doing business. Don't the banks who underwrite the sale (and profit the difference) deserve something for their trouble?

Nope! They've brainwashed clients into thinking this is great RT @jbarro: When IPO drastically mispriced like this don't bankers get fired?

— Henry Blodget (@hblodget) November 7, 2013

After all, Facebook ended its first day almost exactly where its IPO price was set (which would indicate the banks actually nailed it on demand for the stock), and that IPO was generally considered a disaster. Investors didn't get the first-day "pop" they were hoping for, and it gives off the appearance that no one wants to buy in.

In Twitter's case, everyone seems reasonably happy with how the day went, which is another way of saying nothing all that exciting happened today. Not that's that's a bad thing.

This article is from the archive of our partner The Wire.