Twitter opened its first day of trading with a bang, as shares of the company soared 73% to close at a price of $44.90, a significant jump over its IPO price of $26. Twitter, which is listed on the New York Stock Exchange under the symbol “TWTR”, offered 70 million shares and raised $1.82 billion for the company. The opening bell saw top company executives, including co-founder and Chairman Jack Dorsey, vastly expand their wealth. Dorsey’s 4.3% stake in Twitter is now worth $1.05 billion.
Twitter’s IPO has to be rated as a success, especially compared to how Facebook fared in June 2012, which saw its shares drop 20% on its first day of trading. However, shares of Facebook have recovered over the past year due to strong growth in mobile advertising and now are valued at $47, an increase of 36% over an IPO price of $35. Despite Twitter’s strong opening day of trading, some investors are questioning the company’s ability to grow fast enough to justify its now $18 billion valuation. Especially because unlike Facebook, Twitter has yet to turn a profit.
Though Twitter has over 200 million users, a solid portion of them are spam or inactive accounts. And unlike Facebook, which enjoys a significant percentage of casual users, Twitter depends heavily on very active users to click on sponsored tweets and trending topics. Of more concern for Twitter is that the same casual users of Facebook mostly see Twitter as useless. These are risks that executives will have to navigate in order for Twitter to keep its valuation.
Nevertheless, a large number of investors are forging ahead and looking for $TWTR to be the next Google and Apple of technology stocks. Given today’s performance, especially in comparison to social media big brother Facebook’s IPO, it’s clear that most investors think the rewards far outweigh the risks for this investment.